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Income taxSubject 17 of 19

Capital gain

Gain from the sale or exchange of a capital asset, calculated under tax law and subject to classification and exclusions.

Direct answer

What does Capital gain mean?

Gain from the sale or exchange of a capital asset, calculated under tax law and subject to classification and exclusions.

Exam cue: Do not confuse sale proceeds with gain. Subtract adjusted basis and account for selling costs as the rules require.

What does it look like in a question?

New York example

A seller realizes more than the home's adjusted basis and then checks whether a principal-residence exclusion applies.

Common exam trap

What should you not confuse it with?

Capital gain is not the seller's cash at closing.

Related income tax terms

Adjusted basisOriginal basis increased or decreased by tax-law adjustments such as qualifying improvements and allowed depreciation.Amount realizedThe total value received on a disposition, adjusted for selling expenses and other items as tax law provides.BasisA tax measurement used to determine gain, loss, depreciation and other tax consequences for property.Depreciation recaptureTax treatment that can recharacterize or specially tax part of gain tied to prior depreciation deductions.Like-kind exchangeA tax-deferred exchange under Internal Revenue Code section 1031 for qualifying real property held for investment or productive use in a trade or business.Principal residenceA person's main home for tax purposes, determined from use and the applicable facts and rules.
Sources used4 references with section locators

The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.

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