Profits made from the sale of long-term capital assets are taxed more favorably than short-term investments which are taxed according to regular income tax rates. Certain capital gains are exempt from taxes completely. This is theoretically done to provide incentives for investment. Some argue, however, that it leads to distortions aimed at avoiding taxes such as converting income into capital gains. Some countries do not tax capital gains at all.

• buy and hold
• income tax
• holding period
• capital asset
• capital gain