Practice Quiz

Financial Planner

Category - Tax Planning

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Which type of taxpayer may be affected by passive activity and at-risk rules?
  1. Investors in certain partnerships
  2. Investors in limited liability companies
  3. Business owners who do not participate directly in routine management
  4. All of the above
Explanation
Answer: D - In situations where a taxpayer invests in certain partnerships or limited liability companies, or where the owner of a business does not routinely manage the business, the investment may qualify as a passive activity. In that case, certain rules apply.
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