What is defined as the excess of net long-term gains over net short-term capital loss for the taxable year?

The correct choice highlights a specific concept in taxation known as net capital gain. This term refers to the situation where the total net long-term capital gains exceed the total net short-term capital losses within a given taxable year. In other words, when you sell investment assets for more than you paid (long-term holdings), the profits from those sales can result in a favorable tax situation if they exceed any short-term losses incurred from selling other investments at a loss.

This concept is important because capital gains are taxed differently than ordinary income. Long-term capital gains, from assets held longer than a year, typically benefit from lower tax rates compared to ordinary income and short-term capital gains, which are taxed at ordinary income rates. Understanding net capital gain is crucial for tax planning and investment strategies, as it can substantially impact an individual's overall tax liability for the year.

In contrast, net earnings typically refer to the profit of a business after all expenses and taxes have been deducted, while net income is often used in the context of an individual's overall income after deductions but does not specify capital gains or losses. Net tax liability refers to the total amount of tax owed to the government after accounting for credits and other adjustments, not specifically tied to capital gains or losses.