According to the following 2017 data for Floyd Company, a closely held corporation, what its taxable...

According to the following 2017 data for Floyd Company, a closely held corporation, what its taxable income?

Net passive loss: $5,000

Net active income: $3,000

Net portfolio income: $4,000

a) $2,000

b) $3,000

c) $4,000

d) $7,000

Solutions

Expert Solution

Correct Answer (B) $3000.

Explanation

Calculation of Taxable Income

Net Portfolio Income	$ 4,000.00
Less: Setoff of Passive Loss upto maximum portfolio income	$ (4,000.00)
Add: Passive Income	$ 3,000.00
Net Taxable Income	$ 3,000.00

Notes

Portfolio income is considered as a passive income.
Passive loss cannot be setoff with any active income that is why passive loss of $ 1000 is still left unadjusted.
Passive loss can only be setoff with another passive income upto maximum amount of passive income. In above case passive income $ 4000 is deducted to adjust passive loss.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

what is closely held corporation, a personal holding company, and a personal service corporation? what are...

what is closely held corporation, a personal holding company, and a personal service corporation? what are S Corporations? advantages and disadvantages of S Corporations. example of a type of business suitable. May corporations be formed as S Corporations or no? Please explain and include information on S Corporation Election. thank you

What is a Close Corporation (or Closely Held Corporation) and what are the advantages and disadvantages...

What is a Close Corporation (or Closely Held Corporation) and what are the advantages and disadvantages of a Close Corporation?

Able Corporation is a closely held company engaged in the manufacture and retail sales of automotive...

Able Corporation is a closely held company engaged in the manufacture and retail sales of automotive parts. Able maintains a qualified pension plan for its employees but is not currently offering nontaxable fringe benefits. You are a tax consultant for the company and you have been asked to prepare suggestions for the adoption of an employee fringe benefit plan. While talking to the company President, you find out the following information. Employees currently pay their own medical and health insurance...

A closely held corporation sought to repurchase 25 percent of its outstanding shares from one of...

A closely held corporation sought to repurchase 25 percent of its outstanding shares from one of its shareholders. The corporation and the shareholder agreed that the corporation would purchase all of the shareholder’s stock at a price of $500,000, payable $100,000 immediately in cash and the balance in four consecutive annual installments. The state’s incorporation statute provides: “A corporation may purchase its own shares only out of earned surplus but the corporation may make no purchase of shares when it...

BeGood Baking Supply is a small bakery supply company formed as a closely held corporation. The...

BeGood Baking Supply is a small bakery supply company formed as a closely held corporation. The company supplies raw baking materials, paper goods, and equipment to restaurants and bakeries in three states in the upper mid-west. Most of its business, however, is located in a large metropolitan area. BeGood wants to increase its presence in the region and serve five states. In fact, the owners of BeGood would like 75% of their business to come from throughout the region rather...

The Cherry & White Bike Company is a small closely-held company with two owners. Its two...

The Cherry & White Bike Company is a small closely-held company with two owners. Its two owners, Charlotte and George, have decided to expand the business. You are CWB’s accountant. Your responsibilities include maintaining all accounting records and preparing annual financial statements. CWB wants to take out a loan to expand its business in the coming year. The banks and lending institutions require a set of financial statements prepared under U.S. GAAP to evaluate CWB’s credit worthiness. You must prepare...

12. The venture investors and founders of the ACE Products venture, a closely held corporation, are...

12. The venture investors and founders of the ACE Products venture, a closely held corporation, are contemplating merging the successful venture into a much larger diversified firm that operates in the same industry. ACE estimates its free cash flows that will be available to the enterprise next year at $5,200,000. Since the venture is now in its maturity stage, ACE’s free cash flows are expected to continue to grow at a 5 percent annual compound growth rate in the future....

1. The main objective for adjusting the financial statements of a closely held company is: a....

1. The main objective for adjusting the financial statements of a closely held company is: a. To determine if the owner is taking unreasonable compensation b. To adjust the financial statements of a business to more closely reflect its true economic financial position and results of operations on a historical and current basis c. To adjust the financial statements to ensure the financial statements are in conformity with Generally Accepted Accounting Principles d. To adjust the financial statements so there...

Please research the IRS website and provide information on a closely held corporation, a personal holding...

Please research the IRS website and provide information on a closely held corporation, a personal holding company, and a personal service corporation. Please provide an example of a type of business that would be suitable for each of business organizations noted above (provide a different example for each type). Please visit the IRS website to research S Corporations. Please describe the advantages and disadvantages of S Corporations and give an example of a type of business suitable to this type...

Cherry & White Bike Company The Cherry & White Bike Company is a small closely-held company...

Cherry & White Bike Company The Cherry & White Bike Company is a small closely-held company with two owners. Its two owners, Charlotte and George, have decided to expand the business. You are CWB’s accountant. Your responsibilities include maintaining all accounting records and preparing annual financial statements. CWB wants to take out a loan to expand its business in the coming year. The banks and lending institutions require a set of financial statements prepared under U.S. GAAP to evaluate CWB’s...

Subjects