Matt Has Three Passive Activities and Has At-Risk Amounts in Excess

question 88

Multiple Choice

Matt has three passive activities and has at-risk amounts in excess of $100,000 for each.During the year, the activities produced the following income (losses) . $\begin{array}{ll}\text { Activity A } && (\$ 60,000) \\\text { Activity B } && (40,000) \\\text { Activity C } & &75,000 \\\text { Net passive activity loss } &\underline{\quad\quad}& (\$ 25,000) \end{array}$ Matt's suspended losses are as follows:

• A)$25,000 is allocated to C? $0 to A and B.
• B)$12,500 is allocated to A? $12,500 to B.
• C)$15,000 is allocated to A? $10,000 to B.
• D)$8,333 is allocated to A, B, and C.
• E)None of these.

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Definitions:

Vicarious Dissonance

A psychological phenomenon in which an individual experiences dissonance or conflict by observing another person engage in behavior that contradicts their beliefs or values.

Self-Affirmation Theory

A psychological theory suggesting that individuals can maintain their self-integrity by focusing on important aspects of their self-concept, especially when faced with threats.

Representativeness Heuristic

A cognitive short-cut in which instances are assigned to categories or types on the basis of overall similarity or resemblance to the category.

Induced Compliance

A special case of cognitive dissonance: inconsistency is experienced when a person is persuaded to behave in a way that is contrary to an attitude.