What are "capital gains"?

Capital gains refer to the profits that an investor realizes from the sale of an asset when the selling price exceeds the purchase price. This concept is a fundamental part of investment accounting and taxation, as it directly relates to the financial gain received from investments such as stocks, real estate, or other assets.

When an asset is acquired at one price and later sold at a higher price, the difference between the selling price and the original purchase price is what constitutes the capital gain. This gain can be subject to capital gains tax, depending on factors such as the duration for which the asset was held and the tax laws applicable in the investor's jurisdiction.

The other options do not accurately describe capital gains. Selling an asset for less than its purchase price would result in a capital loss rather than a gain. Profits from dividends relate specifically to income earned from stocks and do not factor into capital gains, while interest earned on fixed-income investments pertains to a different category of return altogether. Therefore, understanding capital gains is crucial for investors looking to assess their financial performance and tax liability on realized investment profits.