ch11 - 1. Stuart is the sole owner and a material...

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1. Stuart is the sole owner and a material participant in a business in which he has $50,000 at risk. If the business incurs a loss of $80,000 from operations, Stuart can deduct the full amount. a. True *b. False 2. Stan owns a 20% interest in a partnership (not real estate) in which his at-risk amount was $38,000 at the beginning of the year. During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $50,000 from operations. Stan’s at-risk amount at the end of the year is $44,000. a. True *b. False 3. 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. a. True *b. False 4. Judy owns a 20% interest in a partnership (not real estate) 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 $43,000. a. True *b. False 5. Tonya owns an interest in an activity (not real estate) that converted recourse financing to nonrecourse financing. Recapture of previously allowed losses is required if Tonya’s at-risk amount is reduced below zero as a result of the debt restructuring. *a. True b. False 6. 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. a. True *b. False
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7. All of a taxpayer’s tax credits relating to a passive activity can be utilized when the activity is sold at a loss. a. True *b. False 8. During the year, Lion Company incurs a $25,000 loss on a passive activity, has active income of $17,000, and portfolio income of $12,000. If Lion is a personal service corporation, it may deduct $17,000 of the $25,000 passive loss. a. True *b. False 9. Coyote Corporation has active income of $45,000 and a passive loss of $23,000 in the current year. Coyote cannot deduct the $23,000 loss if it is a personal service corporation. *a. True b. False 10. Peach Company, a closely held C corporation, incurs a $58,000 loss on a passive activity during the year. The company has active income of $34,000 and portfolio income of $24,000. If Peach is a not a personal service corporation, it may deduct the entire $58,000 passive loss. a. True *b. False 11. Wolf Corporation has active income of $55,000 and a passive loss of $33,000 in the current year. Wolf cannot deduct the $33,000 loss if it is a closely held C corporation that is not a personal service corporation. a. True
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This note was uploaded on 04/02/2012 for the course ECON 101 taught by Professor Sing during the Spring '12 term at CUNY Hunter.

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ch11 - 1. Stuart is the sole owner and a material...

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