Which of the following is an example of passive income?

Passive income is generally categorized as income received from investments or business activities in which the taxpayer does not actively engage. In this context, the correct answer regarding an example of passive income is income from real estate ventures for a non-real estate professional. This type of income qualifies as passive because the individual is not materially participating in the operations of the real estate activity, which aligns with the definition of passive income under IRS guidelines.

To elaborate, income from real estate ventures typically includes rental income or income generated from leasing properties, and when a non-real estate professional is involved, it typically means they are not participating in the day-to-day management or decision-making processes of the real estate business. This characteristic is significant because passive income is specifically designed to be distinguished from active income, which involves active participation and engagement in the business.

In contrast, portfolio income, including interest, dividends, annuities, and royalties, represents investment income but doesn't necessarily qualify as passive income in the same way. Winnings from gambling and state and local refunds are also not classified as passive income; they do not derive from rental or business activities and do not fit the criteria for passive activity. Consequently, the example provided regarding income from real estate ventures for a non-real estate professional stands out