38) Stephen and Joy own a duplex in Newport Beach, CA. They live in one unit and rent the other to another couple. Their rental income for the year was $24,000. They incurred the following expenses for the entire duplex:

Insurance

$

8,000

Maintenance

800

Utilities

1,800

Depreciation

4,000

What amount of net income from the duplex should Stephen and Joy report for the current year?

A) $7,300

B) $9,400

C) $16,700

D) $24,000

39) A taxpayer's share of nonrecourse debt is considered an amount at-risk. (True or False)

a) True

b) False

40) Most real estate debt meets the requirements of qualified nonrecourse financing (True or False).

a) True

b) False

41) Libby owns and operates Mountain View Inn, a bed and breakfast. Libby's inn is not considered a passive activity. (True or False)

a) True

b) False

42) A loss must first be allowed under the passive activity loss rules and then must pass through the at-risk rules in order to ultimately be deducted on the tax return. (True or False)

a) True

b) False

43) How much, in rental losses, can an individual earning a salary of $125,000 per year offset against salary if he or she owns at least 10% of a rental activity and actively participates in the rental activity?

A) $0.

B) $2,500.

C) $12,500.

D) $25,000.