What type of income includes gains from the sale or trade of property not related to a trade or business?

Portfolio income is the correct answer because it encompasses income derived from investments, which includes gains from the sale or trade of property such as stocks, bonds, mutual funds, and other investment assets. This type of income is generated from passive activities involving the holding of investments rather than from active trade or business operations.

The characteristics of portfolio income are significant in understanding tax implications, as it is typically subject to different tax rates and rules compared to other forms of income. For instance, capital gains resulting from the sale of these investments may be taxed at preferential rates depending on holding periods.

In contrast, other types of income such as operating income is derived from the core business operations, passive income is generally from rental properties or limited partnerships, and ordinary income often refers to wages or salaries received for work performed. Each of these categories has its own specific context and tax treatment, making the distinction crucial for accurate tax reporting and financial planning.