Two advantages of investing in capital assets are (1) gains are generally deferred and (2) gains are generally taxed at preferential rates.

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Capital assets, such as stocks and real estate, are typically held for a long period of time and therefore any gains are deferred until they are sold. Furthermore, when capital assets are held for longer than a year, any gains are taxed at lower long-term capital gains tax rates, which are often more favorable than ordinary income tax rates.

Two Advantages of Investing in Capital Assets Are (1) Gains