portfolio income such as dividends, interest, and gains from the sale of investment property.
income from securities and other nonbusiness investments; such as dividends, interest, option premiums, and income from a royalty or annuity. Interest on margin accounts may be used to offset investment income without limitation. Investment income earned by passive activities must be treated separately from other passive income. Expenses incurred to generate investment income can reduce investment income to the extent they exceed 2% of adjusted gross income. By excluding capital gains from the calculation, tax law, in effect, prevents a taxpayer from claiming an ordinary deduction for margin interest incurred to carry an investment that is taxable at the favorable capital gains rate. Also called unearned income and portfolio income.
earnings by an insurance company from dividends on its equity portfolio, rent from real estate and other property it owns, and interest on its bond holdings.
