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Capital Gains

Profit from the sale of an asset (like stocks or real estate) that has been held for more than a year, typically taxed at lower rates than regular income.

Ordinary Income

Income from sources like wages, salaries, and interest, generally taxed at higher rates than long-term capital gains.

Dividends

Payments made by a corporation to its shareholders, usually out of its profits.

Basis

The original cost of an asset for tax purposes, used to calculate profit or loss when the asset is sold. A higher basis means less taxable profit.

Step-up in Basis

A tax rule where the basis of an inherited asset is adjusted to its fair market value at the time of the previous owner's death, often reducing capital gains taxes for the inheritor if they later sell the asset.

Security

A tradable financial asset, such as stocks, bonds, or mutual funds.

Internal Revenue Code of 1986

The primary body of U.S. federal tax law.