Which type of income is earned from sources other than employment or active business activities?

• A. Passive Income
• B. Compensation income
• C. Business Income
• D. Self-Employed

Answer: (A)

Income types differ by how actively you participate in earning them. Passive income comes from sources where you do not actively participate in the ongoing operations. It is earned from investments or ventures such as rental properties, dividends, interest, or royalties—sources separate from employment or your main business activities. Therefore, it matches the description of income earned from sources other than employment or active business activities.

Compensation income refers to wages, salaries, or bonuses from working for someone else. Business income typically results from running an enterprise with active participation. Self-employed income comes from one's own business or professional services in which you directly provide labor or services.