In Determining Whether an Activity Should Be Classified as a Hobby

question 89

Multiple Choice

In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity.Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?

• A)The activity shows a profit for 3 of the 5 previous years.
• B)The activity shows a loss for 3 of the 5 previous years.
• C)The activity shows a profit for 3 of the 7 previous years.
• D)The activity shows a loss for 3 of the 7 previous years.
• E)None of the above.

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Definitions:

Mean Number

The average value obtained by dividing the sum of all values in a dataset by the number of values.

Significance Level

A threshold in hypothesis testing, typically denoted by alpha, indicating the probability of rejecting the null hypothesis when it is actually true.

Known Variance

In statistics, refers to a situation where the variance of a population is a known quantity, facilitating certain types of inference.

P(T<=t) Two-Tail

The probability that the test statistic T will fall in either tail of its distribution, assuming the null hypothesis is true, used in two-tailed tests.