Return on Software: Maximizing the Return on Your Software Investment

Capital Gains and Losses for Corporations

Ordinary income comes from activity, whereas a capital gain is income that comes from an increase in the value of something, without any explicit activity. Nothing special was done to make the value go up; it just did. If a software company buys an office building in a fast-growing area, the building is highly likely to appreciate. The value of the building will go up even though they don't do anything active to increase its value; they just maintain it as expected. When they sell the building, the difference between what it sells for and what they (effectively) originally paid for it is a capital gain. A capital loss is the opposite of a capital gain; if the company buys a building and later sells it ...