When an investment or asset is sold for an amount that is greater than what was originally paid. Recognizing gains on an asset will trigger a capital gains situation, but only if the asset is deemed to be capital in nature.

The amount of any capital gain will need to be reported for income tax purposes, and is measured by the selling price minus the purchase price.

Recognizing gains on an asset simply means that you made money on selling a piece of property or an investment. Depending on the nature of the asset and the tax laws of your jurisdiction, the gain on the sale may or may not be taxable.