Paula Owns Four Separate Activities

question 18

Multiple Choice

Paula owns four separate activities.She elects not to group them together as a single activity under the "appropriate economic unit" standard.Paula participates for 130 hours in Activity A, 115 hours in Activity B, 260 hours in Activity C, and 100 hours in Activity D.She has one employee, who works 125 hours in Activity D.Which of the following statements is correct?

• A)Activities A, B, C, and D are all significant participation activities.
• B)Paula is a material participant with respect to Activities A, B, C, and D.
• C)Paula is not a material participant with respect to Activities A, B, C, and D.
• D)Losses from all of the activities can be used to offset Paula's active income.
• E)None of these is correct.

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Definitions:

Promoter

An individual or company responsible for organizing, financing, or sponsoring an event, project, or business venture, often prior to its creation.

Unsecured Promissory Note

A financial agreement for borrowing money that does not require collateral from the borrower.

Total Book Value

The net value of a company's assets found on its balance sheet, calculated by subtracting total liabilities from the total assets.

Corporate Promoter

An individual or entity involved in establishing a company or raising capital for it before its incorporation.