Investment Income

You bought some bonds. They paid interest twice a year. You bought some stocks. They paid dividends quarterly. Together, after you invested your $87,000 worth of now-dead-Grandmama's estate, you collected a total of just under $7,000 this year in investment income. You'll be taxed at ordinary income rates on the bond interest, and at long-term gain rates on the dividend throw. These cash amounts comprise the income on the money you invested.