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    Capital gains vs Ordinary gains

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    Why do we distinguish gains as either ordinary or capital? Please supply examples with your explanations.

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    With regard to investments, ordinary income is earnings that an investment instrument earns or pays out . Interest earned on bonds, T-bills, savings accounts, money market accounts, or lending accounts are all classified as ordinary gains.
    Ordinary income also includes salaries, and wages, profits from a business

    Capital gains are ...

    Solution Summary

    The differences between how capital gains and ordinary gains are earned and treated for tax purposes with examples.