If a Taxpayer Has the Following for the Current Year

question 22

Multiple Choice

If a taxpayer has the following for the current year:
?
$$\begin{array} { l c c c } & \text { Active } & \text { Portfolio } & \text { Passive } \\& \underline { \text { Income} } & \underline { \text { Income } } & \underline { \text { Income } } \\\text { Income } & \$ 75,000 & \$ 22,000 & \$ 55,000 \\\text { Deductions } & ( 45,000 ) & ( 16,000 ) & ( 110,000 ) \\\text { Income(Loss) } & \$ 30,000 & \$ 6,000 & \$ ( 55,000 ) \end{array}$$


I.If the taxpayer is a regular corporation, taxable income from the three activities is a loss of $19,000.
II.If the taxpayer is an individual and the passive income is related to a rental real estate activity in which the taxpayer is an active participant, taxable income is $11,000.
?

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Consuming One More Unit

The action or decision of using up an additional unit of a good or service and its impact, often related to marginal utility.

Budget Line

A graphical representation that shows all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Consumer Income

The total money earned by consumers from all sources, including wages, salaries, investments, and benefits, which impacts their purchasing power.

Price

The amount of money required to purchase a good or service, determined by factors such as supply and demand, production costs, and market competition.