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juin [17]
3 years ago
6

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 not a personal service corporation, it may deduct $34,000 of the passive activity loss.
a. true.
b. false.
Business
1 answer:
-Dominant- [34]3 years ago
6 0

Answer:

B) False: since it is still a closely held C corporation, it cannot reduce its ordinary income through passive losses. If it hadn't been a closely held C corporation then it could have made the deductions.

Explanation:

Passive losses are losses resulting from financial activities, i.e. investments in other corporations where the investor doesn't participate in.

Passive losses cannot offset ordinary income, they must be matched against passive gains only. If passive losses exceed passive gains, they can be carried forward without limitation.

The only exception applies to C corporations that are not;

  • closely held corporations or
  • personal service corporations.

Qualifying C corporations can actually deduct passive losses from certain ordinary income.  

Closely held C Corporations are corporations where during the last 6 months, 50% or more of its stock is owned by 5 or fewer investors.

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Answer:

The total monthly fixed cost and the variable cost per hour is $1,540 and $23

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Explanation:

The computation of the fixed cost and the variable cost per hour by using high low method is shown below:

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