1. earnings attributable to the nominal and recurring business operations of the entity.
2. in taxation, income on the sale of an investment held for 6 months or less.

any income from the normal activities of an individual or business, as distinguished from the sale or exchange of a capital asset held for more than 12 months. Ordinary income is taxed at regular income tax rates, not preferential capital gains rates.

income that is fully subject to ordinary income tax rates (for example, interest income, salary income), as distinguished from income that is subject to the benefit of special tax rates for capital gains . The tax rate for capital gains is less than the ordinary income rate.

defined by the Internal Revenue Code to include salaries, fees, commissions , interests, dividends, and many other items. Taxed at regular tax rates. Contrasted with long-term capital gains , which receive more favorable tax treatment.

Example: Abel would prefer to convert ordinary income into longterm capital gains. He wants to change the nature of property he has from inventory to investment.