If a Taxpayer Sells a Passive Activity with Suspended Passive

question 35

Multiple Choice

If a taxpayer sells a passive activity with suspended passive activity losses from prior years, what type of income can be offset by the suspended passive losses in the year of sale?

• A) Passive activity income.
• B) Portfolio income.
• C) Active business income.
• D) Any of these types of income can be offset.
• E) None of the choices are correct. The suspended losses disappear when the passive activity is sold.

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Definitions:

Sequential Method

A method for allocating costs or resources where the process follows a specific order or sequence, often used in complex costing situations.

ABC

Activity-Based Costing, a method of costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Joint Costs

The costs incurred in a joint manufacturing process.

Split-Off Point

The point in a joint manufacturing process where the joint products become separable.