Rick, a Computer Consultant, Owns a Separate Business (Not Real

question 105

Multiple Choice

Rick, a computer consultant, owns a separate business (not real estate) in which he participates.He has one employee who works part-time in the business.

• A)If Rick participates for 500 hours and the employee participates for 620 hours during the year, Rick qualifies as a material participant.
• B)If Rick participates for 550 hours and the employee participates for 2,000 hours during the year, Rick qualifies as a material participant.
• C)If Rick participates for 120 hours and the employee participates for 120 hours during the year, Rick does not qualify as a material participant.
• D)If Rick participates for 95 hours and the employee participates for 5 hours during the year, Rick probably does not qualify as a material participant.
• E)None of these applies here.

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Definitions:

Equity Financed

Refers to the method of raising capital by selling company shares to investors.

Market Price

The current value at which an asset or service may be traded in a public market.

Total Wealth

The sum of all financial assets and physical possessions that have a monetary value owned by an individual or organization.

Reverse Stock Split

A corporate action that reduces the number of a company's outstanding shares by combining them into fewer, proportionally more valuable shares.