Mara Owns an Activity with Suspended Passive Losses from Prior

question 18

Multiple Choice

Mara owns an activity with suspended passive losses from prior years of $13,000.In the current year,Mara becomes a material participant in the activity.This year the activity generates $6,000 of income.The net effect of this activity on Mara's current year AGI is

• A)an increase of $6,000.
• B)a decrease of $13,000.
• C)0)
• D)a decrease of $7,000.

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Definitions:

Liability

A liability is a financial obligation or debt that a company or individual owes to another entity, which is expected to be paid in the future.

Forged Check

A check that has been illegally modified or fabricated entirely to benefit the person presenting it, often involving unauthorized signature.

E-money

Digital form of currency that can be used to make transactions electronically.

Virtual Cash

Digital or electronic money used for online transactions, not physically tangible.