Consider the Following Three Statements: in Which of the Three

question 44

Multiple Choice

Consider the following three statements: In which of the three cases above could the rental activity automatically be considered a passive activity?

• A)Case 1 only.
• B)Case 2 only.
• C)Case 3 only.
• D)Cases 1, 2, and 3.
• E)None of the above.

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Definitions:

Long-term Loans

Financial obligations that are due for repayment over a period longer than one year.

Conservative Financing

A strategy prioritizing lower risk financing options, typically involving higher equity and lower debt levels to minimize insolvency risks.

Long-term Securities

Financial instruments that typically have a maturity period of more than one year and are used to finance longer-term investments.

Temporary Working Capital

The additional working capital needed to support fluctuations in business activity above the normal level.