Jon Owns an Apartment Building in Which He Is a Material

question 124

Multiple Choice

Jon owns an apartment building in which he is a material participant and also owns a computer consulting business. Of the 2,000 hours he spends on these activities during the year, 55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business.

• A) The computer consulting business is a passive activity but the apartment building is not.
• B) The apartment building is a passive activity but the computer consulting business is not.
• C) Both the apartment building and the computer consulting business are passive activities.
• D) Neither the apartment building nor the computer consulting business is a passive activity.
• E) None of the above.

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Definitions:

Direct Investment

An investment involving the purchase of the physical assets or a significant amount of ownership (stock) of a company in another country.

Indirect Exporting

A method of entering foreign markets by selling products through intermediaries, rather than directly to overseas customers.

Export Duties

Taxes imposed on goods shipped out of a country.

Intermediary

A third party that acts as a mediator or middleman between two entities in a business transaction, facilitating the process.