If a taxpayer has the following for the current year:
$\begin{array}{lrrr}
&\text { Active } & \text { Portfolio } & \text { Passive } \
&\text { Income }&\text { Income }&\text { Income }\
\text { Income } & \$ 75,000 & \$ 22,000 & \$ 55,000 \
\text { Deductions }&(45,000) &(16,000) &(110,000)\
\text { Income(Loss) } & \$ 30,000 & \$ 6,000 & \$(55,000)
\end{array}$
I.If the taxpayer is a regular corporation,taxable income from the three activities is a loss of $19,000.
II.If the taxpayer is an individual and the passive income is related to a rental real estate activity in which the taxpayer is an active participant,taxable income is $11,000.

Question

Quizplus · Accepted Answer

Both statements are correct.Statement I is correct because the taxable income from the three activities is calculated as follows:Active income: $30,000Portfolio income: $6,000Passive income: ($55,000)Taxable income: $30,000 + $6,000 - $55,000 = $19,000 lossStatement II is correct because the passive income is related to a rental real estate activity in which the taxpayer is an active participant. Therefore, the passive income is not subject to the passive activity loss rules. The taxable income is calculated as follows:Active income: $30,000Portfolio income: $6,000Passive income: $55,000Taxable income: $30,000 + $6,000 + $55,000 = $11,000

If a Taxpayer Has the Following for the Current Year