Not just capital or skill, but capital AND skill. Also, simply converting USD into btc would not be passive income. There's no income there, it's simply a conversion of value from one medium to another, in this case fiat dollars to bitcoin. Even if the value goes up, that's not an income, because it hasn't returned anything to you, it's simply the appreciated in value. Capital appreciation isn't income. An easy way to tell if something is an income or an appreciation is whether or not you have to sell the asset to realize the gain. For example, you buy bitcoins and the price of bitcoins goes up- you then have to sell your bitcoins in order to realize (lock in) the gain. If you have to sell to realize the gain, it's not an income
I tend to disagree with this approach
But you may indeed totally discard my disagreement (I don't mind), but you can't possibly discard what most governments think on this. And they basically think along the same lines as I do. That is, they think that capital gains (which you refer to here) are legitimately taxable and consider taxation of these gains as an income tax. Thereby, you have no other choice but to admit that capital gains are income by any means. And what's more, it may well count as a passive income at that since the price of an asset changes without any activity on your part
I was imprecise. As I wrote my statement, I would agree with your disagreement. We were talking about passive income, and my statement should have said that if you have to sell the asset to realize the gain, it's not a
passive income. Capital gains and capital appreciation are income. Just not passive income since there is no income stream, it's a lump value conditioned upon selling the asset, and appreciation is not guaranteed at the time of sale
In fact, I understood that you likely referred to a passive income
But I still disagree with your stance on this matter. If you put your money in a bank and the bank pays you interest on this money, will it count as a passive income? I guess it certainly will. But let's assume that you can't spend money online and have to go to the bank office to withdraw your money with interest accrued. Does it change anything? I guess no, though you have to make some steps to get your money and income earned back. It is basically the same with an asset appreciation. The point is that you don't have to do anything for it to appreciate since it appreciates on its own. Indeed, you can claim that it is basically a form of prolonged trading ("buy low, sell high"), but what if you use a trading bot which does all the gory stuff for you and you just withdraw profits?
Yes, it would be passive income as you surmised. For the bank example, it is different from capital appreciation because 1) there is a set rate of return that is guaranteed (the interest rate is known beforehand) whereas capital appreciation is not guaranteed, and 2) the gain/payment is recurring and pays on top of the asset, whereas capital appreciation is a one-time gain that only occurs when you dispose of or otherwise re-monetize the asset. For capital appreciation, the whole point that disqualifies it from being a passive
income is that, even if it's appreciating, you cannot realize the gain without disposing of the asset. Passive isn't the determining word in "passive income"; income is more important, because capital appreciation can indeed (perhaps necessarily) be a passive gain as you have pointed out
Your points are in fact highly debatable
First, the interest being guaranteed is not actually important for a very simple reason, e.g. if you are a public officer you are more or less guaranteed as well to get paid once or twice a month. Does it make it a passive income? Obviously, it doesn't. In this manner, the fact that your payment (or interest) is guaranteed cannot be considered as a sufficient condition for a passive income. On the other hand, if you own some stocks and expect dividends to be paid every year, this without doubt would count as a passive income. But you are in no case guaranteed to be paid a fixed amount or just be paid anything at all at the end of the day. Second, you don't have to sell all your assets that appreciated since you can just sell only a part of them keeping their total nominal value at the same level (i.e. at which you acquired them). As to me, the profits thus booked could well pass as interest
If you own a property that you rent out, you earn a passive income on it (the recurring rent payments), but you can also earn a capital gain on it if the value of the property appreciates. But that capital appreciation is not an income because the value gained is trapped in the investment until you monetize it by either mortgaging it to take advantage of the appreciation, or selling it to monetize the gain. Same for a security that pays a dividend: the dividend is a recurring income stream that you earn simply for owning the asset, but any appreciation of the stock is tied to the ownership of the stock and cannot be realized until the stock is sold. I do consider the recurring nature and non-ability to monetize without disposing an investment to be the most important aspect as to whether something is a "passive income" or not.
See the dividend example above
