Match the type or character of income to its definition. Drag and drop application. Tax-exempt Tax-exempt drop zone empty. Tax-deferred Tax-deferred drop zone empty. Ordinary Ordinary drop zone empty. Capital Capital drop zone empty. Gains (or losses) on investment or personal use assets that may be taxed at favorable rates Income included in gross income in the current year and taxed at the ordinary rates per the tax rate schedules Income realized during the year that is excluded from gross income and never taxed Income realized during the year that is not included in gross income until a later year