What does capital represent in terms of tax purposes?

In the context of tax purposes, capital represents the unrecovered economic investment in property. This concept is fundamental in understanding how investments are treated for taxation. It reflects the actual investment made in a property or asset that has not yet been recouped through sale or use. When taxpayers dispose of capital assets, the gain or loss that they realize is computed based on the difference between the amount realized from the sale and the unrecovered investment (also known as the basis) in that asset.

Additionally, the other options highlight important financial concepts but do not specifically define what capital represents for tax purposes. The total income earned from investments pertains to income tax, while total net worth refers to all assets versus liabilities, which is broader than just capital. The fair market value of sold assets relates to asset valuation but does not encapsulate the ongoing investment aspect necessary to understand capital in a tax context. Thus, defining capital as the unrecovered economic investment in property provides a precise understanding relevant to tax scenarios.