Skeeter Invests in Vacant Land for the Purpose of Realizing

question 38

Multiple Choice

Skeeter invests in vacant land for the purpose of realizing a profit on its appreciation.He leases the land during the period he holds it.The unadjusted basis of the property is $75,000 and its fair market value is $105,000.The lease payments are $1,200 per year.

• A)The leasing activity will be treated as a rental activity and will be treated as a passive activity regardless of how many hours Skeeter participates.
• B)The leasing activity will be treated as a rental activity and will not be treated as a passive activity if Skeeter qualifies as a real estate professional.
• C)The leasing activity will not be treated as a rental activity.
• D)The leasing activity will be treated as a rental activity and will not be treated as a passive activity if Skeeter devotes more than 500 hours to the activity.
• E)None of the above.

---

Definitions:

Geographical Adjustments

modifications made to policies, wages, or prices to reflect the cost of living or market conditions in different locations.

Warehouse Inventory

The stock of goods and materials held by a company in a warehouse for processing or distribution.

Transportation Costs

Expenses associated with moving goods or individuals from one location to another, including fuel, labor, and vehicle maintenance.

Promotional Allowance

A discount or financial incentive provided to retailers or wholesalers to encourage the promotion and sale of a product.