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Active Income Involves (Time + Effort)

This document discusses different types of income, including active income which requires time and effort such as a job or self-employment, versus passive income which generates money through assets or previous work. Passive income includes portfolio income from selling investments at a higher price than purchased, rental income from real estate, and business income that does not require active involvement. Passive income has the advantage of continually compounding returns through reinvestment and is taxed at a lower capital gains rate for long-term holdings. The two major types of passive activities are rental activities and trade or business activities.

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164 views7 pages

Active Income Involves (Time + Effort)

This document discusses different types of income, including active income which requires time and effort such as a job or self-employment, versus passive income which generates money through assets or previous work. Passive income includes portfolio income from selling investments at a higher price than purchased, rental income from real estate, and business income that does not require active involvement. Passive income has the advantage of continually compounding returns through reinvestment and is taxed at a lower capital gains rate for long-term holdings. The two major types of passive activities are rental activities and trade or business activities.

Uploaded by

heymissruby
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

involves>>

includes>>

Active Income
(time + effort)

Earned Income
Self-employment EI

Unearned Income

activities>>

Advantage>>

no need of startup capital


great way to start your investing career

Taxed>>

highly tax, proportional to your income

Financial freedom

Passive Income
(system+knowledge+experience)

Portfolio Income (Capital Gains)


(knowledge+experience)

Money you get from assets you have purchased or created

selling an investment at a higher price th

Rental Income or Note income from real estate


Trading (buying/selling)
Business income (without you mostly involve)
Creating and Selling Intelectual Property (books, patents, Internet content)
Affiliate or Multilevel Marketting
Recurring income, continous
continually reap the benefits (comp
Funded using borrowed money
by reinvesting after each sale
Favorable tax treatment

tax at lower rate (for long term)

ome (Capital Gains)


+experience)

estment at a higher price than you paid for it

ing/selling)

Paper Assets (stocks, bonds, mutual funds, ETF's, CD's, T-bills, Currencies and other types o
Real Estate
Collectibles/other assets that appreciated in value

eap the benefits (compound your return)


ng after each sale
rate (for long term)

rencies and other types of futures/derivatives

involves>>

Portfolio Income (Capital Gains)


(knowledge+experience)

includes>>

selling an investment at a higher price than you paid for it

activities>>

Trading (buying/selling)

Advantage>>

continually reap the benefits (compound your return)


by reinvesting after each sale

Taxed>>

tax at lower rate (for long term)

Two Major Activities

Rental

Trade or business activities

examples

rent from property


property income

interest from a bank account


business income that doesn't involve you working

Paper Assets (stocks, bonds, mutual fun


Real Estate
Collectibles/other assets that appreciate

s (stocks, bonds, mutual funds, ETF's, CD's, T-bills, Currencies and other types of futures/derivatives

other assets that appreciated in value

oesn't involve you working

s/derivatives

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