Question

Which of the following is not a strategy to reduce or defer taxes in the current year?

a.Converting active income to passive activity income
b.Converting capital gains into ordinary income
c.Eliminating the tax in the current year
d.Converting passive activity expense to active expense
e.Eliminating the tax entirely

Answer 1

Converting active income to passive activity income is not a strategy to reduce or defer taxes in the current year.

Step-by-step explanation:

Converting active income to passive activity income is not a strategy to reduce or defer taxes in the current year.

Active income refers to income earned from active participation in a business or profession, while passive activity income refers to income generated from activities in which the taxpayer does not materially participate.

Therefore, converting active income to passive activity income does not help reduce or defer taxes in the current year.