In Canada, capital gains or losses are realized only when assets (such as stocks, bonds, precious metals, real estate, or other property) are sold or deemed to be sold and are subject to capital gains tax.
The tax doesn't apply to unsold investments or unrealized capital gains. Stock shares won't incur taxes until they're sold no matter how long the shares are held or how much they increase in value.
For the target, a stock sale is usually a nonevent from a tax perspective. The buyer in a stock sale does not get a step-up in tax basis in the assets that comprise the target company, and thus is not able to increase their depreciation and amortization deductions in the same way as in an asset sale.
To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term. Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
The short answer is that a stock sale is better for you, the seller, while the buyer benefits from an asset sale. But, since we're talking about the IRS, there are infinite variations and complications. As such, you will want to get professional tax and legal advice before proceeding.
In an asset sale, the ownership of these acquired assets would change hands, with the buyer negotiating separately for each asset. In a stock sale, ownership of such assets does not change hands in the same way. The target still retains its ownership typically, even if the target has a new owner.
Almost everything you own and use for personal or investment purposes is a capital asset. Examples of capital assets include a home, personal-use items like household furnishings, and stocks or bonds held as investments.
Stocks are financial assets. They're not real assets. A financial asset is a liquid asset that gets its value from a contractual right or ownership claim.