Exam 11: Investor Losses

Describe the general rules that limit the deduction of investment interest expense.

Jenny spends 32 hours a week, 50 weeks a year, operating a DVD rental store that she owns.She also owns a music store in another city that is operated by a full-time employee.Jenny spends 140 hours per year working at the music store.She elects not to group them together as a single activity under the "appropriate economic unit" standard.

Mary Jane participates for 100 hours during the year in an activity she owns. She has no employees and is the only participant in the activity. The activity is a significant participation activity.