Tess owns a building in which she rents apartments to tenants and operates a restaurant. Which of the following statements is incorrect?
A. If 60% of Tess’s gross income is from apartment rentals and 40% is from the restaurant, the rental operation and the restaurant business must be treated as separate activities.
B. If 95% of Tess’s gross income is from apartment rentals and 5% is from the restaurant, she may treat the rental operation and the restaurant business as a single activity that is a rental activity.
C. If 5% of Tess’s gross income is from apartment rentals and 95% is from the restaurant, she may treat the rental operation and the restaurant business as a single activity that is not a rental activity.
D. If 98% of Tess’s gross income is from apartment rentals and 2% is from the restaurant, the rental operation and the restaurant business must be treated as a single activity that is not a rental activity.
E. None of these is correct.
Answer: D
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