Week 7 - Memo

Week 7 – Memo Name: Institutional Affiliation: Course: Instructor: Date: Question You work at a firm as a staff accountant. Listed below are the tax situations of some of the firm’s clients. Your managing partner has asked whether the following situations represent passive or active income. • John received $10,000 in ordinary dividends from Blue Corp. The dividends received by John are considered passive income since John did not spend any time to receive the money but received it as a result of the money saved with Blue Corp (Easley et al., 2021). Applicable IRS code section: Income taxes section 1-1564 • Olivia received $50,000 in wages for her job as an engineer. The $50,000 received by Olivia in wages falls under active income since Olivia must have spent considerable time utilizing his skills to earn the money. Applicable IRS code section: Employment taxes section 3101-3512 (Rates, 2020). • Marcus received $16,000 in non-employee compensation from Main Street Plumbers, Inc. Non-employee compensation is categorized as self-employment, and therefore, it is active income. Applicable IRS code section: Employment taxes section 3101-3512 • Marian’s net income from renta...