Question 1

Rick, a computer consultant, owns a separate business (not real estate)  in which he participates.He has one employee who works part-time in the business.

Accepted Answer

A)  If Rick participates for 500 hours and the employee participates for 620 hours during the year, Rick qualifies as a material participant.
B)  If Rick participates for 550 hours and the employee participates for 2,000 hours during the year, Rick qualifies as a material participant.
C)  If Rick participates for 120 hours and the employee participates for 120 hours during the year, Rick does not qualify as a material participant.
D)  If Rick participates for 95 hours and the employee participates for 5 hours during the year, Rick probably does not qualify as a material participant.
E)  None of these applies here.F) A) and D)
G) All of the above

Question 2

Tomas participates for 300 hours in Activity A and 250 hours in Activity B, both of which are nonrental businesses.  Both activities are active.

Accepted Answer

A) True 
 B)False

Question 3

Chen incurred $58,500 of interest expense this year related to his investments.His investment income includes $15,000 of interest, $9,000 of qualified dividends, and a $22,500 net capital gain on the sale of securities.The
Maximum amount of Chen's investment interest expense deduction for the year is:

Accepted Answer

A)  $15,000.
B)  $24,000.
C)  $37,500.
D)  $46,500.
E)  None of these.F) All of the above
G) B) and C)

Question 4

In 2019, Liam invested $100,000 for a 25% interest in a partnership involved in an activity in which he is a material participant.The partnership reported losses of $340,000 in 2019 and $180,000 in 2020 with Liam's share being $85,000 in 2019 and $45,000 in 2020.How much of the losses can Liam deduct?

Accepted Answer

A)  $0 in 2019, $0 in 2020.
B)  $85,000 in 2019, $0 in 2020.
C)  $85,000 in 2019, $15,000 in 2020.
D)  $85,000 in 2019, $45,000 in 2020.
E)  None of these.F) A) and B)
G) B) and E)

Question 5

Match the treatment for the following types of transactions.
-Treatment of suspended credits when passive activity is sold at a loss.

Accepted Answer

A)  The losses are allowed in the years in which gain is recognized.
B)  Suspended losses are allowed to offset the income from the activity, other passive activities, or active income.
C)  Suspended losses are allowed to the taxpayer to the extent that they exceed the amount, if any, of the step-upin basis allowed.
D)  Any suspended losses may be used in the current year.
E)  The suspended losses are added to the basis of the property.F) No correct choice is given.G) A) and C)
H) B) and E)

Exam 11: Investor Losses

Tomas participates for 300 hours in Activity A and 250 hours in Activity B, both of which are nonrental businesses. Both activities are active.

Correct Answer
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Rick, a computer consultant, owns a separate business (not real estate) in which he participates.He has one employee who works part-time in the business.

Correct Answer
verified

Correct Answer
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Match the treatment for the following types of transactions. -Treatment of suspended credits when passive activity is sold at a loss.

Correct Answer
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Correct Answer
verified

Exam 11: Investor Losses

Tomas participates for 300 hours in Activity A and 250 hours in Activity B, both of which are nonrental businesses. Both activities are active.

Correct AnswerverifiedShow Answer

Rick, a computer consultant, owns a separate business (not real estate) in which he participates.He has one employee who works part-time in the business.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the treatment for the following types of transactions. -Treatment of suspended credits when passive activity is sold at a loss.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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