Identify from the List Below the Type of Disposition of a Passive

question 40

Multiple Choice

Identify from the list below the type of disposition of a passive activity where the taxpayer keeps the suspended losses of the disposed activity and utilizes them on a subsequent taxable disposition.

• A)Disposition of a passive activity by gift.
• B)Nontaxable exchange of a passive activity.
• C)Disposition of a passive activity at death.
• D)Installment sale of a passive activity.
• E)None of the above.

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Definitions:

Promissory Note

A legal instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.

Primary Liability

Primary liability pertains to the direct and immediate obligation to fulfil a financial commitment or compensate for a loss.

Negotiable Instrument

A negotiable instrument is a written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payee able to transfer the instrument to another party.

Drawee

The party, usually a bank, upon whom a check or draft is drawn and is responsible for paying the specified amount of money to the holder.