Capital Asset

Capital assets are assets purchased for investment purposes or for the long-term operation of a business rather than for use in the daily operation of a business. Examples of capital assets include but may not be limited to stocks, a home, motor vehicles, coins or other collectibles, and precious metals.

Capital assets are typically held for longer than one year, although the one-year timeframe is not a requirement for an asset to be considered a capital asset. When a capital asset is sold, the gain or loss is defined as a capital gain or loss. Capital gains and losses are treated differently for income tax purposes than are normal gains and losses depending on if the capital asset was held for more than one year before it was sold. Capital assets that are sold for a gain after being held for more than one year are taxed at a lower tax rate than are normal short-term gains.