What is a royalty in the context of income?

In the context of income, a royalty refers to a payment made to an individual or company for the use of their property, such as intellectual property, patents, copyrights, or natural resources. This payment allows others to exploit ownership rights, generating income based on the economic value of the property. Royalties can come from a variety of sources, including music, literature, inventions, and mineral rights, and are typically based on a percentage of sales or usage.

This definition highlights the nature of royalties as payments for the use of someone else's creation or resource, distinguishing them from other forms of income. For instance, a salary represents compensation for labor or services provided, while capital gains are derived from investments rather than direct payments for rights. Thus, option B accurately captures the essence of royalties within the context of income.