Q:

What is capital income?

A:

Quick Answer

Capital income is income generated by an asset over time, rather than from work done using the asset, according to Investopedia. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income.

Know More
What is capital income?
Credit: Jeff Swensen Getty Images News Getty Images

Full Answer

Capital income, also known as capital gains, can only be realized after an asset is sold, according to Investopedia. In contrast, if an asset is sold at a lower price than it was bought for, the result is a capital loss. In the United States, tax exemptions exist on assets such as common stock holdings to encourage investment, according to the IRS.

Learn more about Financial Planning

Related Questions

  • Q:

    What is a Roth 403(b)?

    A:

    A Roth 403(b) plan is a retirement plan for certain employees of tax-exempt organizations, public schools and certain ministers that operate as a Roth plan, according to Investopedia. Individuals can contribute salary deferral contributions on an after-tax basis, and the investment money grows tax-deferred and distributions are tax-free.

    Full Answer >
    Filed Under:
  • Q:

    What do financing activities involve?

    A:

    Financing activities involve long-term liabilities and shares of stock, which allow companies to raise capital or repay investors, according to Investopedia and accounting expert Harold Averkamp. Companies report a statement of cash flows, which records the amount of money flowing in and out due to these financing activities.

    Full Answer >
    Filed Under:
  • Q:

    When are pension lump-sum payouts offered?

    A:

    Employers opt for lump-sum payments when they want to encourage older employees to take an early retirement, according to Investopedia. If a company pays in lump sum, there is no need to pay for administrative expenses and insurance by the company, which provides the company better accounting returns.

    Full Answer >
    Filed Under:
  • Q:

    At what age should someone start planning for his or her financial future?

    A:

    Individuals should start planning for their financial future as early possible, ideally in their teenage years, as stated by Investopedia, a website dedicated to investing knowledge. Teenagers can learn how to make basic budgets and create short-term and long-term savings goals. Teaching teens how to plan and save for their future needs is a simple way to help them prepare for their future.

    Full Answer >
    Filed Under:

Explore