quiz 2 answers

CHAPTER 11 In the current year, Rich has a $40,000 loss from a business he owns. His at-risk amount at the end of the year, prior to considering the current year loss, is $24,000. He will be allowed to deduct the $40,000 loss this year if he is a material participant in the business Correct Answer: False Judy owns a 20% interest in a partnership in which her at-risk amount was $35,000 at the beginning of the year. The partnership borrowed $50,000 on a recourse note and made a $40,000 profit during the year. Her at-risk amount at the end of the year is $53,000 Correct Answer: True Kelly, who earns a yearly salary of $120,000, sold an activity with a suspended passive loss of $44,000. The activity was sold at a loss and Kelly has no other passive activities. The suspended loss is not deductible Correct Answer: False During the year, Bear Company incurs a $25,000 loss on a passive activity, has active income of $17,000, and portfolio income of $12,000. If Bear is a personal service corporation, it may deduct all of the $25,000 passive loss. Correct Answer: False Nathan owns Activity A, which produces income each year. He also owns Activity B, which produces passive losses each year. From a tax planning perspective, Nathan will be better off if Activity A is passive. Correct Answer: True Joe participates 95 hours in an activity, while an employee participates 5 hours. Joe has materially participated in the activity. Correct Answer: True Joyce owns an activity (not real estate) in which she participates for 100 hours a year; her husband participates for 450 hours. Joyce qualifies as a material participant. Correct Answer: True In the current year, Abby has AGI of $95,000 and a $40,000 loss from a real estate rental activity in which she is a 15% owner. If she is an active participant, she can deduct $25,000 of the loss Correct Answer: True

CHAPTER 13 Realized gain or loss is