If a Taxpayer Cannot Satisfy the Three-Out-Of-Five Year Presumption Test

question 22

True/False

If a taxpayer cannot satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity cannot be deducted in excess of the gross income from the activity.

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Definitions:

Term Life

A type of life insurance policy that provides coverage at a fixed rate of payments for a limited period of time, after which it expires without value if the insured survives the term.

Whole-Life

Refers to a type of life insurance policy that offers coverage for the life of the insured, typically including an investment component that builds cash value.

Universal Life

A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element, which is invested to provide a cash value buildup.

Asset Allocation Strategy

The process of dividing investments among different kinds of asset classes to optimize risk and reward according to an individual's or institution's objectives and risk tolerance.