A.

There are three types of taxable income; 1. active, 2. portfolio, 3. passive. Describe each (in your own words) and make sure you understand the tax implications of these incomes.

B.

Debra Ferguson received the items and amounts of income shown below during 2016. Help her calculate, (a) her gross income and (b) that portion (dollar amount) of her income that is tax exempt.

Salary $33,500

Dividends 800

Gift from mother 500

Child support from ex-husband 3,600

Interest on savings account 250

Rent 900

Loan from bank 2000

Interest on state government bonds 300