For Purposes of the Passive Loss Rules, Income Is Classified

question 84

Essay

For purposes of the passive loss rules, income is classified into three separate categories. What are the three categories of individual income? Give an example of each.
(1)
(2)
(3)

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Definitions:

Cash Flows

The aggregate sum of cash inflows and outflows in a business, significantly impacting its ability to meet short-term obligations.

Investing Activities

Financial activities related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Buying Stocks

The act of purchasing shares in a company with the expectation of earning a return on investment through dividends or stock price appreciation.

Cash Flow

Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business.