What are the four categories of income under IRC Section 61?

Under the Internal Revenue Code Section 61, gross income is broadly defined to include all income from whatever source derived, unless specifically excluded by law. The correct categorization of income as stated in choice B encompasses four key types:

1. Compensation for services – This includes wages, salaries, and other payments made for services rendered, which are fundamental components of income.

2. Business income – This pertains to profits from businesses and self-employment, reflecting earnings from the conduct of a trade or business.

3. Gains from sales of property – This includes profits realized from the sale of capital assets or other property, emphasizing a fundamental aspect of taxable income arising from asset transactions.

4. Interest income – This is earnings from interest paid on savings accounts, bonds, loans, and other financial instruments, which is a common source of income.

These categories succinctly enumerate the various forms of income that contribute to an individual's or entity's gross income and align with the broad principles of tax liability under the IRC. This understanding is vital for the CPA examination as it covers fundamental concepts of taxable income.

Other choices, while they list different types of income, do not comprehensively cover the combinations or the essential elements as outlined