Paula Owns Four Separate Activities

question 33

Multiple Choice

Paula owns four separate activities. She elects not to group them together as a single activity under the "appropriate economic unit" standard. Paula participates for 130 hours in Activity A, 115 hours in Activity B, 260 hours in Activity C, and 100 hours in Activity D. She has one employee, who works 125 hours in Activity D. Which of the following statements is correct?

• A) Activities A, B, C, and D are all significant participation activities.
• B) Paula is a material participant with respect to Activities A, B, C, and D.
• C) Paula is not a material participant with respect to Activities A, B, C, and D.
• D) Losses from all of the activities can be used to offset Paula's active income.
• E) None of the above.

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Definitions:

Indorsement

The act of signing the back of a negotiable instrument, such as a check, thus transferring the rights to another party.

Indorsee

A person or entity to whom the rights under a negotiable instrument, such as a check or promissory note, have been legally transferred.

Enforce

To compel observance of or compliance with a law, rule, or obligation.

Negotiable Promissory Note

A financial document that contains a written promise to pay a specified sum of money to a named person or bearer under certain terms.