A Taxpayer's At-Risk Amount in an Activity Is Increased By

question 73

Multiple Choice

A taxpayer's at-risk amount in an activity is increased by:

• A)a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying.
• B)cash contributions to the activity.
• C)cash distributions from the activity.
• D)a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash contributions to the activity.
• E)a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash distributions from the activity.

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Definitions:

Unique Risk

Also known as unsystematic risk, it refers to the risk associated with a specific company or industry that can be mitigated through diversification.

Inflation Risk

The danger that the value of financial returns or purchasing power will be eroded as inflation diminishes the value of money over time.

Systematic Risk

The type of risk inherent to the entire market or market segment, also known as market risk, which cannot be mitigated through diversification.

Beta

A measure of a stock's volatility in relation to the overall market; a higher beta indicates greater risk and potential return.