New York State Real Estate Salesperson Licensing Exam

What type of income is derived from partnerships and investments?

1. Active income

2. Portfolio income

3. Passive income

4. Earned income

The correct answer is: Portfolio income

The correct answer refers to portfolio income, which is generated from investments in stocks, bonds, and mutual funds, as well as from partnerships and other investments. This income typically comes from a return on capital rather than a return based on labor, which distinguishes it from other types of income. In the context of real estate and taxation, portfolio income is important as it may be treated differently for tax purposes compared to other income types. This could include interest, dividends, and capital gains derived from holding investments or investment properties. Active income is derived from activities in which a person is actively involved, such as working a job or running a business. Earned income is similar, as it includes any income generated from labor, making it distinct from portfolio income. Passive income, on the other hand, includes earnings from rental properties or other income-generating investments without the need for active management, which would not apply directly to income from partnerships or more traditional investment vehicles. Understanding these distinctions is crucial for both tax planning and investment strategy in real estate and the broader financial landscape.