What defines business income under Internal Revenue Code Section 61?

Business income under Internal Revenue Code Section 61 is defined as "all income from whatever sources derived." This broad definition encompasses a wide range of income types, not limited to just business operations or wages. It reflects the principle that all income, regardless of its form or source, is taxable unless specifically exempted by law.

This includes, but is not limited to, revenue generated from business activities, investments, rents, dividends, and interest. By using the phrase "whatever sources derived," the law ensures that it captures all potential avenues of income generation that individuals or entities might engage in. This comprehensive approach helps maintain equity in the tax system by ensuring that all sources of income are subject to taxation.

The other options are more restrictive and do not capture the full spectrum of income that falls under business income. For instance, limiting it to income from investments or from sole proprietorships ignores many other potential sources of income that individuals and businesses may receive. Similarly, focusing solely on wages excludes many other important avenues of income generation that are encompassed in the broader definition provided by Section 61.