Final Exam > Question 1
Individuals, trusts and estates, personal service corporations, and closely held C corporations may deduct their passive activity losses only:
For two out of four accounting periods
From net income for the current year without offsetting income of previous or future years
XXFrom passive activity income
From rental activity income of real estate professionals
Final Exam > Question 2
Passive activity deductions in excess of passive activity gross income (i.e., passive activity losses) in a particular year:
Are unavailable to carry back or forward as off-sets
XXAre carried forward indefinitely to be deducted from subsequent years’ passive gross income
Are carried forward for a maximum of three tax years
May offset passive activity income in the same or subsequent years
Final Exam > Question 3
Taxpayers are not required to allocate gain for disposing of an interest in a multiple-use passive activity or property used in such an activity if their interest in the property is no more than the lesser of:
$20,000 or 25 percent of the fair market value
XX$10,000 or 10 percent of the fair market value
$20,000 or 15 percent of the fair market value
$100,000 or 10 percent of the fair market value
Final Exam > Question 4
All of the following are taxpayers subject to the passive loss limitation except:
Closely held C corporations
Personal service corporations
XXS corporations
Trusts
Final Exam > Question 5
Which of the following is not a factor examined in the seven tests for material participation in an activity?
Material participation by the taxpayer in prior tax years
Number of hours of participation by the taxpayer during the tax year
Facts and circumstances of the taxpayer’s relationship with the business
XXAll of the above are factors
Final Exam > Question 6
In the personal service activity test, an individual is considered to have materially participated in any year if he or she materially participated in the activity for any consecutive or nonconsecutive _____ preceding the tax year.
6 months
12 months
2 tax years
XX3 tax years
Final Exam > Question 7
Which of the following is not one of the six exceptions to the per se passive activity treatment of rental activities?
Incidental exception
Providing-property exception
XXNonbusiness hours exception
All of the above are exceptions
Final Exam > Question 8
The active participation allowance that Congress created to offer relief to taxpayers with modified adjusted gross income (AGI) of less than $100,000 who receive rental income has a maximum of:
$10,000 annually
$15,000 annually
$20,000 annually
XX$25,000 annually
Final Exam > Question 9
To qualify as a real estate professional for the rules of per se passive activities, one must have performed more than _____ of services during the tax year in that real property trade or business.
100 hours
250 hours
500 hours
XX750 hours
Final Exam > Question 10
Which of the following describes the active participation standard?
It is more stringent than the material participation standard.
It does not include the making of management decisions.
XXIt does not require regular, continuous, and substantial involvement in operations.
None of the above describes the active participation standard.
Final Exam > Question 11
Which type of trust is excluded from the passive activity rules under Reg. §1.469-1T(b)(2)?
Testamentary trusts
XXGrantor trusts
Revocable trusts
Irrevocable trusts
Final Exam > Question 12
Which of the following statements accurately describes “grouping” of activities for purposes of the passive activity loss rules?
A taxpayer can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules.
Grouping activities enables taxpayers to prove material participation of the group as a whole rather than for each individual activity.
Grouping can be important in determining whether a taxpayer meets the 10 percent ownership requirement for actively participating in a rental real estate activity.
XXAll of the above statements accurately describe the grouping of activities for purposes of the passive activity loss rules.
Final Exam > Question 13
Which of the following is true concerning limited partners?
XXIf they pass the 500 minimum hours test, income from the limited partnership interest will no longer be considered passive activity income.
If they pass the three-year personal service activity test, income from the limited partnership interest will no longer be considered passive activity income.
Losses arising from the limited partnership activity may never be deducted.
Income from the limited partnership interest is always considered passive activity income.
Final Exam > Question 14
Which of the following is true concerning rental income from self-rented property?
The activity may be grouped with other self-rented property activities.
XXTaxpayers cannot use gains from self-rental activity to offset losses from unrelated passive activities.
Even if the taxpayer rents property to a business in which he or she materially participates, the net rental income is passive.
Rental income from self-rented property can trigger allowance of Form 8582 passive losses.
Final Exam > Question 15
Which of the following management decisions is not considered “active participation” in an activity?
Approving the repair of a leaky roof
Approving a new tenant
Deciding that the tenant may have the month-to-month rental he requests
XXNone of the above