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Final answer:
Earned income is payment for employment, while capital gains are realized from the increase in the value of assets like stocks or real estate that are sold for a profit.
Explanation:
Earned income and capital gains are acquired in different ways. Earned income is payment for employment, such as wages, salaries, commissions, and tips received for working hours, while capital gains are realized from the increase in the value of assets like stocks or real estate that are sold for a profit.
Capital gains are gained throughinvestments where the value of the asset appreciates, resulting in a profit upon sale. On the other hand, earned income is derived from labor-related activities, and the wages are directly proportional to the number of hours worked and the hourly wage set by the employer.
While capital gains can occur from the management of assets like stocks, for which one earns dividends and capital appreciation, earned income is associated with being an employee of a company and receiving compensation for work done.
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