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Simple English definitions for legal terms
portfolio income
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A quick definition of portfolio income:
Portfolio income is money that someone earns from investments, like interest on savings, dividends, or capital gains. It's different from earned income, which is money earned from working. Passive income is a type of portfolio income that doesn't require active participation, like rental income or royalties. Losses on passive activities can't be used to offset net portfolio income for tax purposes.A more thorough explanation:
Definition: Portfolio income is income that is not derived in the ordinary course of a trade or business, such as interest earned on savings, dividends, royalties, capital gains, or other investment sources.
Examples:
- Earnings from stocks and bonds
- Dividends received from investments
- Capital gains from the sale of assets
- Royalties earned from intellectual property
These examples illustrate how portfolio income is earned through investments rather than through active participation in a business or trade. It is important to note that losses on passive activities cannot be used to offset net portfolio income for tax purposes.