Jen and Saachi are the owners of J&S Legal Services, P.C., an incorporated law firm treated as a C corporation for tax purposes. Jen and Saachi work full- time in the firm, performing all of the legal services. This year, J&S generates taxable income of $100,000 from the active business operations, and also reports investment interest income of $22,000 and losses of $28,000 from a passive activity. As a result, J&S Legal Services, P.C. reports taxable income of

Question

Quizplus · Accepted Answer

The taxable income is calculated by adding the active business income ($100,000) and the investment interest income ($22,000), while the passive activity losses ($28,000) are not deductible against active or portfolio income for a C corporation. Thus, the taxable income is $122,000.

Jen and Saachi Are the Owners of J&S Legal Services