In which of the following cases are dividends and royalties included as income?

Dividends and royalties are classified as forms of income that need to be reported on your tax return. When an individual receives dividends from investments in stocks or mutual funds, or royalties from intellectual property rights, these amounts are considered taxable income by the IRS.

Taxpayers are required to include these amounts when calculating their total income for the year, which can impact their overall tax liability. This inclusion helps to ensure that all sources of income, whether earned through employment or through investments and property rights, are properly accounted for in tax calculations. In summary, the requirement to report dividends and royalties reflects the tax system's aim to be comprehensive in capturing all income sources.