Jed Spends 32 Hours a Week, 50 Weeks a Year

question 54

Multiple Choice

Jed spends 32 hours a week, 50 weeks a year, operating a bicycle rental store that he owns at a resort community. He also owns a music store in another city that is operated by a full-time employee. He elects not to group them together as a single activity under the "appropriate economic unit" standard. Jed spends 40 hours per year working at the music store.

• A) Neither store is a passive activity.
• B) Both stores are passive activities.
• C) Only the bicycle rental store is a passive activity.
• D) Only the music store is a passive activity.
• E) None of the above.

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Definitions:

Margin Call

A demand by a broker that an investor deposit further cash or securities to cover possible losses.

Initial Margin

The minimum amount of equity required to enter into a position as security for performance, used in futures and margin trading.

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account.

Margin Call

A demand by a broker that an investor deposit additional money or securities to cover possible losses.