Jon Owns an Apartment Building in Which He Is a Material

question 6

Multiple Choice

Jon owns an apartment building in which he is a material participant and a computer consulting business.Of the 2,000 hours he spends on these activities during the year, 55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business.

• A)The computer consulting business is a passive activity but the apartment building is not.
• B)The apartment building is a passive activity but the computer consulting business is not.
• C)Both the apartment building and the computer consulting business are passive activities.
• D)Neither the apartment building nor the computer consulting business is a passive activity.
• E)None of the above.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume.

Total Costs

The complete aggregate of expenses incurred by a business, encompassing both fixed and variable costs.

Differential Revenue

The difference in revenue between two alternative decisions or scenarios.

Course of Action

A plan or strategy designed to achieve a specific goal or solve a problem.