Jackson Company incurs a $50,000 loss on a passive activity during the year.The company has active income of $34,000 and portfolio income of $24,000.If Jackson is a personal service corporation, it may deduct $34,000 of the passive activity loss.

Question

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Personal service corporations are subject to the passive activity loss rules, which generally do not allow the deduction of passive activity losses against active or portfolio income. The $34,000 of active income cannot be used to offset the $50,000 passive activity loss.

Jackson Company Incurs a $50,000 Loss on a Passive Activity