INCOME

income. The money or other form of payment that one receives, usu. periodically, from

employment, business, investments, royalties, gifts, and the like. See EARNINGS. Cf. PROFIT. accrued income.Money earned but not yet received.

accumulated income.Income that is retained in an account; esp., income that a trust has generated, but that has not yet been reinvested or distributed by the trustee. [Cases: Internal

Revenue 4008. C.J.S. Internal Revenue § 446.]

accumulated taxable income.The income of a corporation as adjusted for certain items (such as excess charitable contributions), less the dividends-paid deduction and the accumulated-earnings credit. • It serves as the base upon which the accumulated-earnings tax is imposed. See accumulated-earnings tax under TAX. [Cases: Internal Revenue 3833.] active income. 1. Wages; salary. 2. Income from a trade or business.

adjusted gross income.Gross income minus allowable deductions specified in the tax code. —

Abbr. AGI. [Cases: Taxation 979.]

adjusted ordinary gross income.A corporation’s gross income less capital gains and certain expenses. • The IRS uses this calculation to determine whether a corporation is a personal holding company. If 60% or more of a corporation’s AOGI consists of certain passive investment income, the company has met the test for personal-holding-company classification. IRC (26 USCA) § 543(b). — Abbr. AOGI. See personal holding company under COMPANY. [Cases: Internal

Revenue 3853–3858. C.J.S. Internal Revenue §§ 383–385.]

aggregate income.The combined income of a husband and wife who file a joint tax return.

[Cases: Internal Revenue 3566.1, 4481. C.J.S. Internal Revenue §§ 335, 366, 637.]

blocked income.Money earned by a foreign taxpayer but not subject to U.S. taxation because

the foreign country prohibits changing the income into dollars.

current income.Income that is due within the present accounting period. — Also termed

current revenue.

deferred income.Money received at a time later than when it was earned, such as a check

received in January for commissions earned in November. disposable income.Income that may be spent or invested after payment of taxes and other

primary obligations. — Also termed disposable earnings.

distributable net income.The amount of distributions from estates and trusts that the beneficiaries will have to include in income. [Cases: Internal Revenue 3173, 4018. C.J.S.

Internal Revenue §§ 66, 95, 439, 443–444, 452.]

dividend income.The income resulting from a dividend distribution and subject to tax. [Cases:

Internal Revenue 3743–3774; Taxation 988. C.J.S. Internal Revenue §§ 72, 389–391, 395;

Taxation § 1728.]

earned income.Money derived from one’s own labor or active participation; earnings from

services. Cf. unearned income (2).

exempt income.Income that is not subject to income tax. [Cases: Internal Revenue

4045–4071; Taxation 1048. C.J.S. Internal Revenue §§ 327, 462–474, 670, 798; Taxation §

1736–1737.] fixed income.Money received at a constant rate, such as a payment from a pension or annuity.

gross income.Total income from all sources before deductions, exemptions, or other tax

reductions. IRC (26 USCA) § 61. — Also termed gross earnings. [Cases: Taxation 979.]

imputed income.The benefit one receives from the use of one’s own property, the

performance of one’s services, or the consumption of self-produced goods and services.

income in respect of a decedent.Income earned by a person, but not collected before death. • This income is included in the decedent’s gross estate for estate-tax purposes. For income-tax purposes, it is taxed to the estate or, if the estate does not collect the income, it is taxed to the eventual recipient. — Abbr. IRD. [Cases: Internal Revenue 4035–4039; Taxation 1024. C.J.S. Internal Revenue §§ 435–439, 457–461; Taxation §§ 1710–1712.]

“If a decedent has earned income that he or she had not received before death and was not entitled to receive before death, such income is known — for Federal Income Tax purposes — as ‘income in respect of a decedent’ (I.R.D.). For example, if the decedent earned fees or salary or wages for work done before death but not payable until later, and if decedent was a cash method taxpayer (versus an accrual method taxpayer), that earned but unpaid income would not properly be shown on the final income tax return filed for the decedent, for that taxable period ends with the date of death. Rather it is I.R.D. that becomes taxable to the estate of the decedent.” John K.

McNulty, Federal Estate and Gift Taxation in a Nutshell 89 (5th ed. 1994).

investment income.See unearned income.

net income.Total income from all sources minus deductions, exemptions, and other tax reductions. • Income tax is computed on net income. — Also termed net earnings. [Cases:

Taxation 980. C.J.S. Taxation §§ 1715–1716.]

net operating income.Income derived from operating a business, after subtracting operating

costs.

nonoperating income.Business income derived from investments rather than operations. operating income.See ordinary income (1).

ordinary income. 1. For business-tax purposes, earnings from the normal operations or activities of a business. — Also termed operating income. 2. For individual income-tax purposes, income that is derived from sources such as wages, commissions, and interest (as opposed to income from capital gains). [Cases: Internal Revenue 3230.1–3257; Taxation 986, 996. C.J.S.

Internal Revenue §§ 128–129, 131–145, 490–491; Taxation §§ 1724, 1732–1733.]

other income.Income not derived from an entity’s principal business, such as earnings from

dividends and interest.

passive income.Income derived from a business, rental, or other income-producing activity that the earner does not directly participate in or has no immediate control over. See PASSIVE ACTIVITY. Cf. portfolio income.

passive investment income.Investment income that does not involve or require active participation, such as gross receipts from royalties, rental income, dividends, interest, annuities, and gains from the sale or exchange of securities. IRC (26 USCA) § 1362(d). [Cases: Internal

Revenue 3892.] personal income.The total income received by an individual from all sources.

portfolio income.Income 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. • For tax purposes, losses on passive activities cannot be used to offset net portfolio income. Cf. passive income.

prepaid income.Income received but not yet earned. — Also termed deferred revenue.

previously taxed income.An S corporation’s undistributed taxable income taxed to the shareholders as of the last day of the corporation’s tax year. • This income could usu. be withdrawn later by the shareholders without tax consequences. PTI has been replaced by the accumulated adjustments account. — Abbr. PTI.

real income.Income adjusted to allow for inflation or deflation so that it reflects true

purchasing power.

regular income.Income that is received at fixed or specified intervals.

split income.An equal division between spouses of earnings reported on a joint tax return,

allowing for equal tax treatment in community-property and common-law states.

taxable income.Gross income minus all allowable deductions and exemptions. • Taxable income is multiplied by the applicable tax rate to compute one’s tax liability. [Cases: Internal

Revenue 4529; Taxation 980. C.J.S. Internal Revenue §§ 644–645; Taxation §§ 1715–1716.]

unearned income. 1. Earnings from investments rather than labor. — Also termed investment

income. 2. Income received but not yet earned; money paid in advance. Cf. earned income.

unrelated-business income.Tax. Gross income earned by a nonprofit corporation from activities unrelated to its nonprofit functions. • A nonprofit corporation’s income is tax-exempt only to the extent that it is produced by activities directly related to its nonprofit purpose. — Also termed unrelated-business taxable income. IRC (26 USCA) § 512(a)(3)(A). [Cases: Internal Revenue 4068. C.J.S. Internal Revenue §§ 473–474.]

“The [Internal Revenue] Service has justified the unrelated business income tax as a means of preventing unfair competition between tax-exempt and for-profit providers. Thus, part of the analysis of whether income from a business venture is unrelated business taxable income focuses on the impact of the activity on competitors by inquiring whether the activity at issue is one generally offered by commercial enterprise. The categorization of a business activity of an exempt organization as related or unrelated to the exempt purpose of the organization follows very few bright-line rules. Approaches to the question of exempt purposes within the context of unrelated business income differ substantially from those used in the context of the qualification of an entity for exempt status itself.” Barry R. Furrow et al., Health Law § 8-1, at 419 (2d ed. 2000).

[Blacks Law 8th]