Capital gains calculation refers to the process of determining the profit earned from the sale of a capital asset, which is generally a property or investment held for more than a year. This calculation involves subtracting the asset's basis, or original cost, from the selling price, resulting in either a capital gain or loss. The nature of the capital asset and the holding period play critical roles in how these gains are taxed, influencing whether they are classified as short-term or long-term gains.
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