Ned, a College Professor, Owns a Separate Business (Not Real

question 20

Multiple Choice

Ned, a college professor, owns a separate business (not real estate) in which he participates in the current year. He has one employee who works part-time in the business.

• A) If Ned participates for 120 hours and the employee participates for 120 hours during the year, Ned does not qualify as a material participant.
• B) If Ned participates for 95 hours and the employee participates for 5 hours during the year, Ned probably does not qualify as material participant.
• C) If Ned participates for 500 hours and the employee participates for 520 hours during the year, Ned qualifies as material participant.
• D) If Ned participates for 600 hours and the employee participates for 2,000 hours during the year, Ned qualifies as a material participant.
• E) None of the above.

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Definitions:

Nash Equilibria

In game theory, it's a principle where a participant does not gain by altering their approach if all other participants maintain their original strategies.

Plant Capacity

The maximum output that a manufacturing facility can produce under normal conditions.

Time-Discounted Values

The present value of future cash flows or benefits, adjusted for the time value of money.

Profit Streams

Continuous flows of profit from a business investment or enterprise over time.