Which of the Following Is a True Statement

question 3

Multiple Choice

Which of the following is a true statement?

• A)Expenses associated with a "hobby" are never deductible.
• B)The deductibility of an activity's expenses in excess of revenues depends upon whether the activity is primarily profit-motivated or a hobby as determined by facts and circumstances.
• C)Taxpayers engaged in a "hobby" are always presumed to be motivated by profit.
• D)The regulations do not provide any guidance for determining whether an activity is profit motivated.
• E)All of these are truE.The regulations provide a list of factors for determining whether an activity is profit motivated.The presumption that a hobby is profit motivated depends upon whether the activity generates a profit in three of five consecutive years.

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Definitions:

Seventy-Five Percent

A quantitative measure or threshold, often referenced in various contexts to signify a substantial majority of 75%.

LIFO Method

Last-In, First-Out method, an inventory valuation technique where the most recently produced or purchased items are the first to be used or sold.

Gross Profit

Gross profit is the financial measure calculated by subtracting the cost of goods sold from revenue, indicating the efficiency in production and pricing.

LIFO Method

An inventory valuation method that assumes the last items placed in inventory are the first sold, known as Last-In, First-Out.