Q:

How do you define gross income?

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Quick Answer

In the simplest terms, gross income refers to all income received by a person or corporation in a set period of time; for individuals, this includes payment accrued from all sources before taxes, while it includes total revenue for organizations before accounting for product sales. Gross income for people and companies comes from many sources; researchers at the Cornell University Law School Legal Information Institute maintain a list of qualifying sources, which includes gains, interest, royalties and fee-based compensation.

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Full Answer

Although the term "income" does not appear in legal or financial codes and definitions of the Internal Revenue Service, or IRS, it provides examples for people and companies of sources qualifying and not qualifying as gross income. Essentially, all payment people and businesses accrue in cash, through sales, services and transfer or lease of real or personal property, qualifies as gross income. Dividends, annuities and pensions also fall under the umbrella of gross income. For individual workers, payments received from employers count as income too. This includes commissions, fees and payment for services, say researchers at the LII.

People consider interest and revenue generated from insurance, such as life insurance, as their gross income too. Payments from alimony and marriage separations qualify as well, as does any income received from trusts, estates, debt forgiveness and endowments, as stated by LII.

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