Gray Company,a closely held C corporation,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 Gray is a not a personal service corporation,it may deduct $34,000 of the passive loss.

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If the corporation is not a personal service corporation and has active income, it may deduct up to the amount of its active income, which in this case is $34,000, from its passive loss. The remaining $16,000 of the passive loss can be carried forward to future years.

Gray Company,a Closely Held C Corporation,incurs a $50,000 Loss on a Passive