Homework Answers
Answer: True
The actual passive loss is $230,000 but the net active income is $210,000. The eligibility of passive loss deduction is up to the extent of active income, since it is a closely held C corporation and is not a Personal Service Corporation (PSC).
Therefore, the corporation can deduct $210,000, which is the whole of active income; the rest amount of passive loss (230,000 – 210,000 =) $20,000 can’t be deducted from the portfolio income; this amount is a complete loss this year.
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