Final answer:
Monet will generally be better off if activity B is a passive activity because the losses from B can offset the active income from activity A, reducing overall tax liability.
Step-by-step explanation:
True, Monet will likely be better off that activity B is a passive activity from a tax planning perspective. In the United States tax code, losses from passive activities can usually be used to offset active income only to a certain extent.
The rules for deducting passive losses are more favorable when they can be offset against passive income rather than active income. If activity A produces active income and activity B is classified as a passive activity that produces losses, Monet can use the losses from activity B to offset the income from activity A, thus reducing the overall tax liability.
Furthermore, if activity B were not a passive activity, the limitations on deducting active losses against other types of income might be more stringent, making it potentially less beneficial for tax purposes. The specific rules and limits depend on current tax laws, which can be complex and subject to change, so professional tax advice is usually recommended in these situations.