The term that describes the portion of a capital gain that is not taxed as ordinary income is capital gain. When an asset is sold for more than its purchase price, the profit is classified as a capital gain. Depending on how long the asset was held, these gains can be categorized as either short-term or long-term, which affects their tax treatment.
Long-term capital gains, generated from assets held for more than one year, are typically taxed at a lower rate than ordinary income, allowing for more favorable tax treatment. Therefore, the answer acknowledges that capital gains specifically refer to these profits that have their own distinct tax implications, separate from ordinary income, which is subject to standard income tax rates.
Understanding this distinction is crucial, as it influences financial planning and investment strategies. The other terms listed do not specifically relate to the concept of capital gains or their taxation and do not address the unique tax treatment applicable to profits made from the sale of investments or assets.