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.
Nonbusiness income refers to earnings derived from passive sources such as interest, dividends, and nonbusiness capital gains, primarily used in taxation to calculate the net operating loss deduction. It includes income from investment assets separate from apportionment in multistate corporations.
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.
An investment or activity that generates passive income, typically seen in income-oriented real estate limited partnerships. This income can offset passive activity losses (PALs) for tax purposes.
A Real Estate Limited Partnership (RELP) is a form of limited partnership that invests in real estate properties, allowing the income and potential profits to pass through to the limited partners while being managed by a general partner.
Unearned income refers to income that is not derived from active work, such as wages, salaries, or professional fees, but from investments, savings, or other passive sources like dividends, interest, and rental income.
