1. A trade or business activity is not a passive activity if you
materially participated in the activity.
True
False
2. You are considered to have participated in a trade or business
activity for a tax year if
A. You participated in the activity for 90 hours.
B. You
materially participated in the activity for any 2 years (whether or not
consecutive) of the 10 immediately preceding tax years.
C. You
participation was substantially all the participation in the activity of all
individuals for the tax year, including the participation of individuals who did
not own any interest in the activity.
D. All
of the above.
3. In general, you can deduct passive activity losses only from
passive activity income (a limit on loss deductions). You can carry any excess
loss forward to the following year or years until used, or until deducted in the
year you dispose of your entire interest in the activity in a fully taxable
transaction.
True
False
4. A trade or business activity is an activity that
A.
Involves the conduct of a trade or business.
B. Is
conducted in anticipation of starting a trade or business.
C.
Involves research or experimental expenditures that are deductible under
Internal Revenue Code section 174 (or that would be deductible if you chose to
deduct rather than capitalize them).
D.
All of the above.
5. A trade or business activity includes a rental activity or the
rental of property that is incidental to an activity of holding the property for
investment.
True
False
6. A rental activity is a passive activity even if you materially
participated in that activity, unless
A. You own an interest in the trade of business activity during the year.
B. You
materially participated as a real estate professional.
C.
The rental property was used mainly in that trade or business activity during
the current year, or during at least 2 or the 5 preceding tax years.
D.
Your gross rental income from the property is less than 2% of the smaller of its
unadjusted basis or fair market value.
7. Your activity is not a rental activity if
A. The
average period of customer use of the property is 7 days or less.
B. The
average period of customer use of the property is 30 days or less and you
provide significant personal services with the rentals.
C.
You provide extraordinary personal services in making the rental property
available for customer use.
D.
Any of the above.
8. Significant personal services include only services including
only services performed by individuals. To determine if personal services are
significant, all relevant facts and circumstances are taken into consideration,
including the frequency of the services, the type and amount of labor required
to perform the services, and the value of the services relative to the amount
changed for use of the property. Significant personal services include
A.
Services needed to permit the lawful use of the property.
B.
Services to repair or improve property that would extend its useful life for a
period substantially longer than the average rental.
C.
Services that are similar to those commonly provided with long-term rentals of
real estate, such as cleaning and maintenance of common areas or routine
repairs.
D.
None of the above.
9. If you or your spouse actively participated in a passive
rental real estate activity, you can deduct up to _______________ of loss from
the activity from your nonpassive income.
A.
$3,000.
B.
$25,000.
C.
$12,500.
D.
None of the above.
10. Active participation is not the same as material
participation. Active participation is not required to take the low-income
housing credit, the rehabilitation investment credit, or commercial
revitalization deduction from rental real estate activities.
True
False
11. You do not treat the work you do in your capacity as an
investor in an activity as participation unless you are directly involved in the
day-to-day management or operations of the activity. Work you do as an investor
includes
A.
Studying and reviewing financial statements or reports on operations of the
activity.
B.
Preparing or compiling summaries or analyses of the finances or operations of
the activity for your own use.
C.
Monitoring the finances or operations of the activity in a nonmanagerial
capacity.
D. All
of the above.
12. Generally, rental activities are passive activities even
if you materially participated in them. However, if you qualified as a real
estate professional, rental real estate activities in which you materially
participated are not passive activities. If you qualified as a real estate
professional for 2008, report income or losses from rental real estate
activities in which you materially participated as nonpassive income or losses,
and complete
A. Line 43 of Schedule E (Form 1040).
B. Line 15 of Schedule D (Form 1040).
C. Line 7 of Form 4797.
D.
Line 16 of Form 8582.
13. You qualified as a real estate professional for the year
if
A.
More than half of the personal services you performed in all trades or
businesses during the tax year were performed in real property trades or
businesses in which you materially participated.
B. You performed more than 750 hours of services during the tax year in real
property trades or businesses in which you materially participated.
C. Personal services you performed as an employee in real property trades or
businesses that you were not an owner of.
D.
Both A and B above.
14. Use Form 6198, At-Risk Limitations, to figure how much
loss from an activity you can deduct. You must file Form 6198 with your tax
return if
A. You have a loss from any part of an activity that is covered by the at-risk
rules.
B. You are not at risk for some of your investment in the activity.
C. Both A and B above.
D.
You borrowed in connection with the activity of holding real property.
15. The at-risk limits apply to individuals (including partners
and S corporation shareholders), estates, trusts, and certain closely held
corporations (other than S corporations).
True
False
16. For the at-risk rules, a corporation is a closely held
corporation if at any time during the last half of the tax year, more than 50%
in value of its outstanding stock is owned directly or indirectly by or for five
or fewer individuals. To figure if more than 50% in value of the stock is owned
by five or fewer individuals, the following applies.
A. Stock owned
directly or indirectly by or for a corporation, partnership, estate, or trust is
considered owned proportionately by its shareholders, partners, or
beneficiaries.
B. An individual
is considered to own the stock owned directly or indirectly by or for his or her
family.
C. If a person
holds an option to buy stock, he or she is considered to be the owner of that
stock.
D. Any of the
above.
17. You are subject to the at-risk rules, if you are involved in
the following as a trade or business or for the production of income,
A. Holding, producing, or distributing motion picture films or video tapes.
B. Farming.
C. Leasing section 1245 property, including personal property and certain other
tangible property that is depreciable or amortizable.
D. Any of the above.
18. Section 1245 property includes any property that is or has
been subject to depreciation or amortization and is
A. Personal property.
B. Other tangible property (other than a building or its structural components)
that is used in manufacturing, producing, extraction, or furnishing
transportation, communications, electrical energy, gas, water, or sewage
disposal services, a research facility used the activities in these, or a
facility used in any of the activities in these for the bulk storage of fungible
commodities.
C. A single purpose agricultural or horticultural structure or a storage
facility used for the distribution of petroleum.
D. Any of the above.
19. You are at risk in any activity for
A. The money and
adjusted basis of property you contribute to the activity.
B. Amounts you
borrow for use in the activity if you are personally liable for repayment.
C. Amounts you
borrow for use in the activity if you pledge property (other than property used
in the activity) as security for the loan.
D. All of the
above.
20. Even if you are personally liable for the repayment of a
borrowed amount or you secure a borrowed amount with property other than
property used in the activity, you are not considered at risk if you borrowed
the money from a person having an interest in the activity or from someone
related to a person (other than you) having an interest in the activity. This
does not apply to
A. Amounts
borrowed by a corporation from a person whose only interest in the activity is
as a shareholder of the corporation.
B. Amounts borrowed
from a person having an interest in the activity as a creditor.
C. Amounts borrowed
after May 3, 2004, secured by real property used in the activity of holding real
property (other than mineral property) that, if nonrecourse, would be qualified
nonrecourse financing.
D. Any of the
above.
