How is 'capital gain' defined?

'Capital gain' is defined as the increase in the value of an asset or investment over time, which is only realized when the asset is sold. This definition is crucial in the context of investing because it highlights the concept of realization—capital gains are not recorded until the sale of the asset. For instance, if an investor purchases a stock for $50 and later sells it for $100, the capital gain is $50. It's also important to note that if the asset has not been sold, the increase in its value is merely a paper gain and does not impact the investor's tax situation or liquidity until the transaction occurs.

The other descriptions do not accurately capture the essence of capital gains. Total profits from stock trading within a year focuses on overall trading activity without clarifying if those gains have been realized. The profit before taxes on securities may describe a type of profit but does not specifically reflect the idea of capital gains, which depend on the appreciation of the asset's value over time. Lastly, the value of investments held indefinitely suggests a situation where no transactions have occurred, thus no capital gains would have been realized. Therefore, the definition emphasizing the increase in value upon the sale is the accurate portrayal of capital gains.