accounting 440 mcq quiz 494977

Accounting 440 MCQ Bank 1. Stuart is the sole owner and a material participant in a business in which he has $50,000 at risk. If the business incurs a loss of $80,000 from operations, Stuart can deduct the full amount. a. True b. False 2. Stan owns a 20% interest in a partnership (not real estate) in which his at-risk amount was $38,000 at the beginning of the year. During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $50,000 from operations. Stan’s at-risk amount at the end of the year is $44,000. a. True b. False 3. In the current year, Rich has a $40,000 loss from a business he owns. His at-risk amount at the end of the year, prior to considering the current year loss, is $24,000. He will be allowed to deduct the $40,000 loss this year if he is a material participant in the business. a. True b. False 4. Judy owns a 20% interest in a partnership (not real estate) in which her at-risk amount was $35,000 at the beginning of the year. The partnership borrowed $50,000 on a recourse note and made a $40,000 profit during the year. Her at-risk amount at the end of the year is $43,000. a. True b. False 5. Tonya owns an interest in an activity (not real estate) that converted recourse financing to nonrecourse financing. Recapture of previously allowed losses is required if Tonya’s at-risk amount is reduced below zero as a result of the debt restructuring. a. True b. False 6. Kelly, who earns a yearly salary of $120,000, sold an activity with a suspended passive loss of $44,000.  The activity was sold at a loss and Kelly has no other passive activities.  The suspended loss is not deductible. a. True b. False 7. All of a taxpayer’s tax credits relating to a passive activity can be utilized when the activity is sold at a loss. a. True b. False 8. During the year, Lion Company incurs a $25,000 loss on a passive activity, has active income of $17,000, and portfolio income of $12,000.  If Lion is…