In taxation, active income refers to earnings derived from active involvement in work and trade, including salaries, wages, and commissions. It is distinct from portfolio and passive income, which come from investments and activities in which the taxpayer does not materially participate.
Material Participation refers to the level of involvement by a taxpayer in the operations of a business activity on a regular, continuous, and substantial basis. This term is crucial in distinguishing between passive and active income for tax purposes.
An in-depth look into Passive Activity Loss (PAL), including definition, examples, frequently asked questions, related terms, online resources, and suggested books for further studies.
Portfolio income in taxation includes interest, dividends, royalties, and gains and losses from investments. It distinguishes between passive, active, and portfolio income, indicating that passive activity losses may not be offset against active or portfolio income.
