A Taxpayer's Rental Activities Will Be Considered a Trade or Business

question 222

Multiple Choice

A taxpayer's rental activities will be considered a trade or business, rather than a passive activity, if

• A) more than half of the taxpayer's personal services performed in all business activities during the year are spent managing the rental properties.
• B) the taxpayer performs more than 500 hours of work during the year managing the rental properties.
• C) the taxpayer performs more than 750 hours of work during the year managing the rental properties.
• D) conditions A and C, but not B, are satisfied.

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Definitions:

Equity Method

An accounting technique used by a parent company to record its investments in subsidiaries or affiliates based on the equity stake's pro-rata share of net assets rather than the historical cost of the investment.

Stockholders' Equity

The remaining value of a company's assets after liabilities are subtracted, indicating the stake held by shareholders.

Liabilities

Financial obligations or debts that an entity owes to external parties, which must be settled through the transfer of assets, provision of services, or other economic benefits.

Assets

Resources owned or controlled by a business, expected to produce economic value or future benefits.