Question

Match the non-business income with the typical rule for allocation:

a) Interest and dividends
b) Rental income
c) Royalties
d) Gains and losses on real property

Answer 1

Interest and dividends, rental income, royalties, and gains and losses on real property are allocated based on different rules.

Step-by-step explanation:

When allocating non-business income, there are typical rules for each type:

1. Interest and dividends: This income is usually allocated based on the taxpayer's residence or domicile.
2. Rental income: This income is allocated based on the location of the rental property.
3. Royalties: Royalties are often allocated based on the location of the intellectual property generating the income.
4. Gains and losses on real property: These are allocated based on the location of the property.

For example, if a taxpayer receives interest and dividends from investments, the allocation of this income would be based on their residence or domicile. If they own rental properties in different states, the rental income would be allocated based on the location of each property. Similarly, if they receive royalties from an intellectual property that is registered in multiple countries, the allocation would be based on the location of each registered intellectual property.