In Overview of the Tax Treatment of Capital Assets, we learned that capital gain or loss, for tax purposes, arises only on the sale or exchange of a capital asset. In this lesson, we'll define the terms sale and exchange.

Sale Defined

Neither the Internal Revenue Code nor the Treasury regulations comprehensively define sale or exchange, so that task has largely fallen to the courts. 4 Mertens Law of Fed. Income Tax'n § 22:7, Westlaw (database updated Feb. 2019). To that end, the courts have...