Final answer:
Suspended losses from passive activities can offset active and portfolio income upon the sale or full divestment of the passive activity, which is true according to tax laws.
Step-by-step explanation:
The correct answer is a) True. Suspended losses from a passive activity can indeed be used to offset the taxpayer's other forms of income such as active and portfolio income, but only in the year that the taxpayer sells or divests the activity which generated the passive loss. This is in accordance to the tax laws governing passive activities and the treatment of suspended losses.
Passive losses
suspended under tax regulations are generally not deductible against active (e.g., wages, business income where the taxpayer materially participates) or portfolio income (e.g., interest, dividends) until the passive activity is disposed of entirely. However, when the activity is completely disposed of in a fully taxable transaction to an unrelated party, any
unused losses
can then be used to reduce other types of income.