7 A passive activity is one where the taxpayer

A. works exclusively on that activity.

B. participates in "significant participation activities" which exceed 100 hours.

C. does not materially participate.

D. materially participates in the activity in three of the preceding five years.

8 Rental activities, generally, are considered passive activities; however, certain taxpayers who are involved in real property trades or businesses are not subject to passive activity loss rules.

True

False

9 An election can be made to forgo the carryback. If this election is made

A. two years are added to the carryforward period.

B. the carryforward period is extended indefinitely.

C. the carryforward period remains 20 years.

D. the NOL add back rules will not apply to the first two years of the carryforward.

10 Portfolio income includes dividends, interest, annuities and royalties not derived in the ordinary course of a trade or business. It does not include gains and losses on property that produces these types of income if the disposition of the property does not occur in the ordinary course of business.

True

False