What is capital gain in the context of real estate?

Capital gain in the context of real estate refers to the increase in the value of a property that occurs from the time of purchase until it is sold. This gain is realized when the property is sold at a price higher than its original purchase price. It is an important concept for real estate investors and homeowners, as the profit from the sale can be subject to taxation under capital gains tax laws.

To understand why this answer is correct, consider that capital gains reflect the profit derived from the appreciation of an asset’s value. This appreciation can occur due to various factors, including improvements made to the property, changes in market conditions, and increasing demand in a particular area.

The other options do not capture the essence of what constitutes a capital gain. Costs incurred during property acquisition, the original purchase price, and depreciation all pertain to different financial aspects of real estate ownership and investment but do not define capital gain itself. Thus, option A correctly identifies capital gain as the increase in asset value prior to sale.