A Loss Must First Be Allowed Under the Passive Activity

question 33

True/False

A loss must first be allowed under the passive activity loss rules and then must pass through the at-risk rules in order to ultimately be deducted on the tax return.

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Definitions:

Marginal Disutility

The added dissatisfaction or inconvenience experienced by consuming one more unit of a good or service.

Marginal Utility

The extra utility a consumer obtains from the consumption of 1 additional unit of a good or service; equal to the change in total utility divided by the change in the quantity consumed.

Absolute Terms

A method of expression or measurement that is independent of other variables or comparisons, focusing on intrinsic values.

Prospect Theory

A behavioral economic theory that describes how people make choices when faced with uncertain outcomes, emphasizing the value of gains and losses rather than final outcomes.