Rita Earns a Salary of $150,000, and Invests $40,000 for a 20

question 93

Multiple Choice

Rita earns a salary of $150,000, and invests $40,000 for a 20% interest in a passive activity. Operations of the activity result in a loss of $250,000, of which Rita's share is $50,000. How is her loss characterized?

• A) $40,000 is suspended under the passive activity loss rules and $10,000 is suspended under the at-risk rules.
• B) $40,000 is suspended under the at-risk rules and $10,000 is suspended under the passive activity loss rules.
• C) $50,000 is suspended under the passive activity loss rules.
• D) $50,000 is suspended under the at-risk rules.
• E) None of the above.

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Definitions:

MPC

The marginal propensity to consume, which is the portion of additional income that a consumer spends on goods and services.

Consumption

The total value of goods and services consumed by households and businesses.

APC

Average Propensity to Consume, the fraction of total disposable income that households plan to spend on consumption as opposed to saving.

Income

The financial gain accrued by an individual or entity within a specified period, often through wages, salaries, or investments.