Passive income is a rent received on a regular basis, with little effort required to maintain it. It is advocated by some authors, especially by
Some examples of passive income are:
* Repeated regular income, earned by a sales person, generated from the payment of a product or service that must be renewed on a regular basis, in order to continue receiving its benefits - also called residual income.
Royaltiesfrom publishing a book or from licensing a patentor other form of intellectual property;
* Earnings from internet advertisement on your websites;
* Earnings from a business that does not require direct involvement from the owner or merchant;
Dividendand interestincome from owning securities, such as stocksand bonds, are usually referred to as portfolioincome, which can be considered a form of passive income;
Passive income is usually taxable. The American
Internal Revenue Servicedefines passive income as "any activity... in which the taxpayer does not materially participate." [cite web
url = http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000469----000-.html
title = 26 U.S.C. § 469 (c)(1)(B)
accessdate = 2008-07-01
year = ] Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to
An Internet phenomenon
Edward de Bonoin his book " Handbook for the Positive Revolution" states that "at some point value must be created in order to be distributed and enjoyed." [cite book | author = Edward de Bono| title = Handbook for the Positive Revolution| publisher = Penguin | year = 1993 | month = February | isbn=0140126791 | url = http://www.amazon.com/Handbook-Positive-Revolution-Edward-Bono/dp/0140126791/ref=sr_1_35?ie=UTF8&s=books&qid=1210852053&sr=1-35 | accessdate = 2008-05-15] There is a lot of real value on the Internet, and a lot of it is free to any websurfer. There is value in free information, free education, free entertainment, free socialization, and social interactionplatforms. Since the beginning of the commercialization of the Web, entrepreneurs have been trying to find viable business models of selling the web content and services. [cite web
url = http://www.web-strategist.com/blog/2007/11/05/web-strategy-the-many-forms-of-monetization-using-the-web/
title = Web Strategy: The Many Forms of Monetization using the Web
accessdate = 2008-05-15
year = ] Some of the problems of selling the online content can be attributed to high cost of software, high cost of qualified labour, expensive equipment, office space etc. These can be minimized in one person operations which use
free softwareand have very small business overheads. In such cases, even a relatively modest income, together with frugal lifestyle, might be sufficient enough to form a basis for a viable passive income model.
Emerging cottage industry
With the advent of
Web 2.0, the concept of a passive income became a of an informal grassroots, ( bottom up) movement and an emerging cottage industryof loosely coupled, independent individuals, who use a combintion of their life story, personality, interests, and practical knowledge, to produce an engaging content and an alleged passive income. Appearing honest, transparent, and promising nothing, these individuals report in their blogs, podcasts or websites, their income sources, methods and strategies they use, to any reader or listener, without any additional requirements. There are no registration, subscriptions, or any other kind of fees. They claim to obtain their income mainly through advertising, remunerationfor referrals and recommendations, and through donations from appreciative readers. Steve Pavlinarepresents but one example of such activities; although, it is not clear how long a passive income generated in such manner can remain so without any interventions, addition of new material, or site maintenance. The long taileffect could partly explain survival potential of such one person or family businesses.
psychology, this concept can also be perceived as a powerful motivational vector, similar to the desire to achieve financial independence, or to have greater freedom of choice.
As a concept, some form of passive income can be perceived as one of the fundamental benefits of
capitalism, where capital of some description, gathered or acquired by other means, generates monetary valuefor its owner, regardless of his activities. The concept of passive income evokes controversy from a moral standpoint, being considered parasitic (not producing, but benefiting from the work of others), as well as from economics perspective, as being unrealistic on a universal scale, or utopian. If everybody lived of some sort of passive income, how would things get done and produced?
Passive income has the potential to be used as an enticement for fraudulent internet scams. [cite web
url = http://www.fido.gov.au/fido/fido.nsf/byheadline/Investing+on+the+internet+and+other+electronic+transactions?openDocument
title = Investing on the Internet and other electronic transactions
accessdate = 2008-05-15
year = ] It can also involve independently publishing or self-publishing books containing knowledge or advices of unasessed value.
Chris Anderson (writer)
Social Value Orientations
The long tail
The World is Flat"
* [http://www.fido.gov.au/fido/fido.nsf/byheadline/Investing+on+the+internet+and+other+electronic+transactions?openDocument Australian Securities and Investment Commission financial tips and safety checks]
Wikimedia Foundation. 2010.
Look at other dictionaries:
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Passive Loss — A loss incurred through a rental property, limited partnership, or other enterprise in which the individual is not actively involved. Passive losses can only be used to offset passive income, not wage or portfolio income … Investment dictionary