1) If a taxpayer has active income, portfolio income, and both passive gains and passive losses from limited partnership interests, how are the passive items treated on the return?

a.The passive losses are first netted against the passive gains. If the result is income, it is included in income. If the result is a loss, the loss is disallowed and may be carried forward to future years.

b.The passive gains are included in income. The passive losses are deducted against portfolio income.

c.The passive gains are included in income. The passive losses are disallowed.

d.The passive gains and losses are netted. Any gain is included in income. Losses are lost forever.

2) Eric buys land as an investment for $250,000 on June 30, 2021. He subsequently decides he doesn't like the neighborhood and sells the land for $225,000 on October 25, 2021. What is the nature of Eric's gain or loss?

a.Long-term capital gain

b.Short-term capital loss

c.Short-term capital gain

d.Long-term capital loss