Chapter 12 MC

Question 1

Which of the following statements concerning the limitations on passive activity losses is (are) correct?
I. The limitations are generally designed to limit tax benefits with respect to activities in which the taxpayer does not materially participate.

II. Excess passive losses disallowed under the limitations are allowed in the year the taxpayer disposes of his or her entire interest in the passive activity in a taxable disposition.

Answer 1

The answer is (C). Both I and II are correct.