During the Current Year,Martin Purchases Undeveloped Land as an Investment

question 115

Multiple Choice

During the current year,Martin purchases undeveloped land as an investment.Martin intends to rent the land as pastureland and hopefully sell it later for a profit.In the current year,Martin receives no rent but he does pay taxes of $2,800,mortgage interest of $900 and liability insurance of $500.How much of these expenses can Martin deduct (before any limitations) on his current tax return?

• A)$0
• B)$1,400
• C)$3,700
• D)$4,200

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Definitions:

Income

Funds acquired regularly from labor or investment returns.

At-risk Amount

The maximum value taxpayers are at risk of losing in an investment, affecting the deductible loss limit in tax declarations.

Ordinary Loss

A loss derived from normal business operations or transactions that is not classified as a capital loss.

Passive Activity

Passive activity involves business or trade activities in which the person is not actively involved, affecting how losses and income are treated for tax purposes.