What constitutes ordinary income or loss?

Ordinary income or loss refers to the type of income that is generated through routine business activity, such as wages, salaries, bonuses, and interests, rather than through capital transactions. The correct choice emphasizes that ordinary income is fully includable in gross income without possessing characteristics that are typically associated with capital gains or losses.

Specifically, this means that the income does not arise from the sale of capital assets or from investments. Instead, it is derived from everyday operations or services provided. This understanding positions ordinary income within the broader context of tax regulations, as it is treated differently from capital gains or losses in terms of tax rates and implications.

Other options focus on different aspects of income or loss. The first option pertains to income generated from the sales of assets, which could often be considered capital gains rather than ordinary income. The option about income generated from gifts misrepresents the nature of what constitutes ordinary income, as gifts are generally excluded from gross income. Lastly, the option about capital gains losses specifically addresses capital transactions, which fall under a separate category of income and are not classified as ordinary income.