What type of capital gain is realized when an asset is held for more than one year?

A long-term capital gain is realized when an asset is held for more than one year before being sold. This type of gain is important for tax purposes because it is typically taxed at a lower rate than short-term capital gains, which apply to assets held for one year or less. The rationale behind this distinction is to encourage long-term investment in the market.

Investors benefit from understanding the difference between long-term and short-term capital gains as they make decisions about when to buy and sell assets. Holding assets for more than a year can provide significant tax advantages, which can contribute to an overall better investment strategy. This consideration is crucial for individuals looking to maximize their after-tax returns on investment over time.