Tom and Shawn own all of the outstanding stock of Brady Corporation (a retail store operated as a C corporation).This year,Brady generates taxable income of $20,000 from active business operations,and also reports investment interest income of $22,000 and losses of $28,000 from a passive activity.As a result,Brady Corporation reports
A)net income of $42,000.
B)interest income of $22,000 and a passive loss carryover of $8,000.
C)business income of $20,000 and a passive loss carryover of $6,000.
D)business income of $20,000,interest income of $22,000,and a passive loss carryover of $28,000.

Question

Quizplus · Accepted Answer

Brady Corporation can offset the passive activity losses against the passive income, but since there is no passive income, the $28,000 loss is carried over. The interest income of $22,000 is reported separately. The passive loss carryover is $8,000 ($28,000 loss - $20,000 business income).

Tom and Shawn Own All of the Outstanding Stock of Brady