The gain from selling a capital asset that is held for more than a specified time. The gain is usually the amount realized (net sales price) less your investment (adjusted tax basis) in the property. Capital gains receive favorable tax treatment in that the maximum rate is set at 10 to 28 percent when the maximum tax rate on ordinary income is 39.6 percent. Capital losses can only be deducted in any year up to the amount of capital gains plus $3,000. Special rules apply for capital gains realized on investments in qualified Small Business Stock that permit 50 percent of the capital gain to be excluded.
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