{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Week 3 Question - 1 7-7 Differentiate between the following...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 7-7 Differentiate between the following: Active income – Is the income for which services have been performed. This includes wages, tips. Salaries, commissions and income from businesses in which there is a material participation.   http://www.investopedia.com/terms/a/activeincome.asp#ixzz1oqewmezO Passive income – This is the earnings an individual derives from a rental property, limited partnership or other enterprise in which he/she is not actively involved. Passive income is usually taxable, however it is often treated differently by the IRS. http://www.answers.com/topic/passive-income#ixzz1oqfaQWwU Portfolio income – Is the income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and it is not earned through normal business activity. Usually, income from interest on money that has been loaned does not count as portfolio income. http://www.investopedia.com/terms/p/portfolioincome.asp#ixzz1oqg6qR5w 7-13 Briefly, what is “material participation”? Why is the determination of whether a taxpayer materially participates important? Answer: Material participation is an IRS classification for working in a business on a regular, continuous and substantial basis. This means that it is the point at which an individual spends enough time working on a project that they can no longer be considered a passive investor in the project. At this point they are considered to be actively involved.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern