Tax Accounting

Question 7-7. Differentiate between the following: active income, supine income, and portfolio income.
Active income is what an individual earns from an activity entered by that person with enwrapped to earn income. An example of this would be buying a field of operations with the intent of reselling it for a profit.
Passive income is earned through an enthronization or trade and the individual is not fully feign with the operation of it.
Portfolio income is income earned through investments, interest income, mutual fund, or stock earnings.

Questions 7-13. Briefly, what is material participation? Why is the determination of whether a imposepayer materially participates important?
When an individual is active and continuously heterogeneous in a shed, it is considered material participation. When this happens, income earned from this project cannot be counted as passive income but rather it has to be active income. There is a great need to experience whether income is passive or active because it will determine how income is taxed and sacking are deducted.

Problem 7-46: 46. Mary Beth is a CPA, devoting 3,000 hours per year to her practice. She also owns an office building in which she rents out space to tenants. She devotes no(prenominal) of her time to the direction of the office building.



She has a property trouble firm make all management decisions for her. During 2011, she fixred a mischief, for tax purposes, of $30,000 on the office building. How must Mary Beth treat this loss on her 2011 tax return?
This should be treated as passive loss because she is not directly involved with the rental. each(prenominal) operational activities are being performed by the property management company.

Problem 8-34:
Mike and Sally Card file a joint return for the 2011 tax year. Their adjusted gross income is $65,000 and they incur the following interest expenses:
Qualified Education Loans…….$3,500
Personal Loans………………………….$1,000
nursing home Mortgage Loan…………………$4,000
Loan Used to Purchase a Variety...If you want to get a full essay, order it on our website: Orderessay



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