Legal Definitions - investment income

Investment Income refers to money or profit generated from assets or capital, rather than from direct labor or employment. It is the return an individual or entity receives from putting their money or property to work, often through investments like stocks, bonds, real estate, or savings accounts.

• Example 1: Stock Dividends

  Imagine Maria owns shares in a publicly traded pharmaceutical company. At the end of the fiscal quarter, the company performs well and decides to distribute a portion of its profits to its shareholders. Maria receives a payment of $350, which is her share of these distributed profits.

  Explanation: This $350 is considered investment income because it is money Maria earned solely from her ownership (investment) in the company's stock, not from working for the company or providing any services to it.

• Example 2: Rental Income from Property

  David purchased a small commercial property several years ago and leases it out to a local coffee shop. Each month, the coffee shop pays David $2,500 in rent for the use of the space.

  Explanation: The $2,500 David receives monthly is investment income. He is earning money from his real estate asset, which he has put to use by renting it out, rather than from a salary or wages for a job.

• Example 3: Interest from a Savings Account or Bond

  The local library foundation has a significant endowment, a portion of which is held in a high-yield savings account and another portion invested in corporate bonds. Over the course of a year, the savings account accrues $1,500 in interest, and the bonds pay out $4,000 in interest.

  Explanation: Both the $1,500 from the savings account and the $4,000 from the bonds are investment income for the foundation. This money is earned as a return on the foundation's capital (the money deposited in the account or lent by purchasing bonds), without any direct labor or effort from the foundation's staff to generate these specific earnings.