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All of the outstanding stock of a closely held C corp

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All of the outstanding stock of a closely held C corporation is owned equally by David Smith and Steve Bufusno. In 2011, the corporation generates taxable income of \$30,000 from its active business activities. In addition, it earns \$20,000 of interest from investments and incurs a \$40,000 loss from a passive activity. How much income does the C corporation report for 2011?

\$10,000 of portfolio income
\$0
\$20,000 of portfolio income
None of the above

8. (TCO G) Steve, who is single, has \$100,000 of salary, \$10,000 of income from a limited partnership, and a \$25,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is \$100,000. Of the \$25,000 loss, how much is deductible?
\$25,000
\$10,000
\$15,000
\$0

When comparing corporate and individual taxation, the following statements are true, except:

Individuals have exemptions and a standard deduction; corporations do not.
Both corporate and individual taxpayers may have a long-term capital loss carryforward.
All taxpayers may carry net operating losses back two years, forward 20 years.
Both types of taxpayers have percentage limitations on the charitable contribution deduction, coupled with a carryover of the excess contribution.

Solution Summary

All of the outstanding stock of a closely held C corporation is owned equally by David Smith and Steve Bufusno. In 2011, the corporation generates taxable income of \$30,000 from its active business activities. In addition, it earns \$20,000 of interest from investments and incurs a \$40,000 loss from a passive activity. How much income does the C corporation report for 2011?

Solution Preview

None of the above -- the company will use the loss of \$40,000 against the income of \$30,000 to create a loss of \$10,000. The loss can't be used ...

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