Grackle Corporation, a personal service corporation, had $230,000 of net active income, $40,000 of portfolio income and a $250,000 passive activity loss during the year. How much is Grackle's taxable income?
A) $20,000
B) $40,000
C) $270,000
D) $520,000
E) None of these.

Question

Quizplus · Accepted Answer

Grackle Corporation's taxable income is calculated by adding net active income and portfolio income, then subtracting the passive activity loss. However, passive activity losses cannot offset active or portfolio income for a personal service corporation. Therefore, taxable income is $230,000 (net active income) + $40,000 (portfolio income) = $270,000.

Grackle Corporation, a Personal Service Corporation, Had $230,000 of Net