When Applying the Limitations of the Passive Activity Rules,a Taxpayer's

question 106

True/False

When applying the limitations of the passive activity rules,a taxpayer's AGI is classified into active income,portfolio income and passive income.For this purpose,portfolio income includes dividends,interest,annuities,and royalties.

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Definitions:

Leverage

The use of borrowed funds to increase one's investment capacity and potentially enhance the rate of return, also referring to influencing factors or the ability to influence outcomes.

Borrowing Money

The act of obtaining funds from lenders under the agreement to repay with interest within a specified timeframe.

Increases Equity

An action or event that raises the value of an owner's shares in a company or property.

Decreases Risk

Involves actions or strategies aimed at reducing the potential for loss or harm in various contexts, such as financial investments, business operations, or personal decisions.