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Gwar [14]
3 years ago
14

In the current year, Plum, Inc., a closely held C corporation, has $410,000 of net active income, $20,000 of portfolio income, a

nd a $75,000 passive activity loss. What is Plum’s taxable income for the current year if (a) Plum is a personal service corporation and (b) Plum is not a personal service corporation?
Business
1 answer:
fenix001 [56]3 years ago
5 0

Answer:

(a) $430,000

(b) $355,000

Explanation:

To answer the question, it is important to understand the meaning of passive income or loss and how it applies to personal service corporation (PSC) and C corporation.

Passive income refers to income received from investment without active participation in the running of the business. Example of passive income is dividend.

For personal service corporation (PSC), when there is a passive loss, in can only be deducted from any other available passive income from other investments. If there is no other passive income, the passive loss is not deductible from active income.

For C corporation, passive loss is allowed to be deducted against net active income. However, it can not be deducted against portfolio income .

The questions are then answered as follows:

a) If Plum is a personal service corporation (PSC)

Since Plum is PSC, it cannot deduct passive activity loss of $75,000 from the net active income nor portfolio income.

Therefore, it taxable income is the addition of net active income and portfolio income as follows:

Taxable income = $410,000 + $410,000 = $430,000

b) Plum is not a personal service corporation

Here, Plum is considered as a C coporartion. Therefore, it can deduct the passive loss from the active income  but not from portfolio income. Its Taxable income is therefore as follows:

Taxable income = ($410,000 - $75,000) + $20,000 = $355,000

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On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. How would Fl
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C.) Accounts receivable 7,840 Cash discounts 160 Sales 8,000

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Assuming for now that credit customer will avail the cash discount, the following journal entry shall be made on November 10 by Flores mills in respect of credit sales made by it.

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Based on the above discussion, the answer shall C.) Accounts receivable 7,840 Cash discounts 160 Sales 8,000

6 0
3 years ago
The purchasing power of money and the price level vary: Group of answer choices inversely. directly during recessions, but inver
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$1,200

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Harry's deductions = (50% x $200) + (100% x $600) + (100% x $500) = $100 + $600 + $500 = $1,200

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The material wealth of society is determined by the economy's _________, which is a function of the economy's _________. a. inve
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