explain what a capital gain is?

Answer 1

The difference in the purchased price and the sold price of an item is the profit/capital gain. Earned income, such as a paycheck for hourly or salary wages, is not referred to as capital gain.
Capital Gain:
In finance, a capital gain is profit that results from the appreciation of a capital asset from its purchase price. If the price of the capital asset has declined instead of appreciated, this is called a capital loss. Capital gains occur in both real assets, such as property, as well as financial assets, such as stocks or bonds.

Answer 2

Adding to what other ppl said. They are reported on Schedule D, capital losses offset capital gains and if the net is a loss you can deduct a max of 3000 and carry foward indefinately.

Answer 3

A realized capital gain is the difference between the price at which you sold an investment and the price at which you purchased it.

An unrealized capital gain is the difference between the current market value of an investment and the price at which you purchased it.

Typically, only realized capital gains are taxable.

Answer 4

Capital Gains are any profits you make on things other than income. For example...the sale of your house, stocks, etc.

There are certain exemtions that the IRS gives for capital gains. For example, if you are married, you don't get taxed on the first $500K of capital gains you make from selling your house.