Question

It is important to determine material participation so the taxpayer is allowed to __________.

1) Ignore the safe harbor rules (hobby loss rules) for passive business losses.

2) Reduce self-employment tax by the net operating loss from a nonpassive business.

3) Deduct nonpassive business losses from other income.

4) Deduct passive business losses from other income.
Please provide explanation also.

Answer 1

Answer:

your answer is option (2)