What are capital gains?

What are capital gains?
Capital Gains are calculated as the difference between the priceyou paid for a security and price you received for the security atthe time of sale. Depending on the length of time the security isheld, different tax calculations are used.

If a security is held less than year, the gain is consideredshort-term and taxed based on the investor's personal income taxrate. If the security is held longer than a year, the gain is taxedat a fixed rate of twenty percent.

If you hold mutual funds, this is distributed once a year and thetaxes are the obligation of the investor. This is only applicablein a taxable mutual fund held outside of tax-deferred accounts.Even if the capital gains are reinvested in a taxable mutual fund,the investor is obligated to pay the taxes on the gain.