Which of the Following Investments Generally Reduces Pre-Tax Income

question 65

Multiple Choice

Which of the following investments generally reduces pre-tax income?

• A) Stocks
• B) Retirement account contributions
• C) Mutual funds
• D) Bonds

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Definitions:

Passive Loss Rules

IRS regulations that prevent investors from offsetting income with losses from passive activities unless they directly participate in them.

Disallowed Loss

A loss that cannot be deducted for tax purposes, often because it does not meet specific criteria set by tax authorities.

Passive Income

Income generated from ventures in which an individual is not actively involved.

At-risk Amount

The amount of money an investor can actually lose from an investment, often used to limit losses in activities where money is at risk.