Which term refers to taxes imposed on the gain in an investment?

Which term refers to taxes imposed on the gain in an investment?

• A. Basis
• B. Fee simple or fee simple absolute
• C. Capital gains taxes
• D. Tenants in common

Answer: (C)

Capital gains taxes are taxes assessed on the profit realized from selling an investment. When you sell, you compare the sale price to your adjusted basis (often your cost plus improvements) to determine the gain; the tax is then applied to that gain, not to the total sale amount. The rate you pay depends on how long you held the asset (short-term vs long-term) and your overall income. This concept matters in estate planning because assets can receive a stepped-up basis at death, potentially reducing future capital gains for heirs if they sell. The other terms are not taxes: basis is the amount used to measure gain, fee simple is a form of real property ownership, and tenants in common is another form of co-ownership.

Capital gains taxes are taxes assessed on the profit realized from selling an investment. When you sell, you compare the sale price to your adjusted basis (often your cost plus improvements) to determine the gain; the tax is then applied to that gain, not to the total sale amount. The rate you pay depends on how long you held the asset (short-term vs long-term) and your overall income. This concept matters in estate planning because assets can receive a stepped-up basis at death, potentially reducing future capital gains for heirs if they sell. The other terms are not taxes: basis is the amount used to measure gain, fee simple is a form of real property ownership, and tenants in common is another form of co-ownership.