What does ordinary income mean on the CPA exam?
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Ordinary income. Income taxed at the regular graduated rates rather than at preferential capital gain rates. Wages, interest, business profit and recaptured depreciation are all ordinary.
Defined against Sec. 64.
Related terms
- ordinary loss: A loss deductible against ordinary income without the capital loss limits.
- hot assets: A partnership's unrealized receivables and inventory.
- guaranteed payment: A payment to a partner for services or the use of capital, determined without regard to partnership income.
- capital gain net income: Capital gains minus capital losses for the year, long-term and short-term combined.
- operating income: Profit from the core business, before interest and tax.
- capital loss: Loss on the sale of a capital asset.