A consultant has the following income items:
Self Employment Income: $55,000
Rental Income: $30,000
Dividend Income: $4,500
Long-Term Capital Gain: $3,600
Short Term Capital Loss: $2,200
What should the consultant report as passive income?
a. $30,000
b. $31,400
c. $35,900
d. $34,500
Answer: A. $30,000
Explanation: The rental income is the only one of the choices that qualify as passive income. Passive income, as defined by the IRS, includes income from rental activities, limited partnerships, and other activities in which the taxpayer does not materially participate.
The other items/choices are as follows:
Self Employment Income: Earned Income Dividend Income: Investment Income Long-Term Capital Gain: Investment Income Short-Term Capital Loss: Investment Loss