What constitutes total taxable income and distributions?

Total taxable income and distributions encompass a variety of forms of income that are subject to taxation. Capital gains, which arise from the sale of investment assets, and dividends, which are payments made by corporations to their shareholders, are both critical components of taxable income for an individual investor.

When calculating total taxable income, the inclusion of capital gains and dividends highlights how income can be derived not just from traditional employment but also from investments. These forms of income can result in tax obligations in the year they are realized or distributed, making it essential for investors to accurately track and report them. Hence, the combination of capital gains and dividends subject to tax reflects the holistic view of an investor's taxable earnings from their investment activities. This choice correctly identifies the components that contribute to the total taxable income and distributions that an individual may need to report during tax filings.

Other options provided do not capture the full scope of taxable income as recognized under tax regulations. For instance, monthly income from investments may not inherently cover taxable elements such as capital gains. Salaries and wages alone represent only one aspect of total income, ignoring investment income. Finally, tax-exempt or deferred income does not constitute total taxable income as it is not subject to current tax liabilities.