It’s reasonably common for large firms—especially in the technology sector—to make small investments in other companies. Occasionally, these investments work out well, the owner sells some of the shares, and records the capital gain as income. This is no different from the way you or I would report a capital gain as income when we’re doing our taxes every year, and it’s perfectly legal and aboveboard. An honest company breaks out these sales, however, and reports them below the “operating income” line on its income statement. The problem arises when companies try to boost their operating
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