Problem 1: All of the outstanding stock of a closely held C corporation is owned equally by David Smith and Steve Bufusno. In 2011, the corporation generates taxable income of $30,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity. How much income does the C corporation report for 2011?
- $10,000 of portfolio income
- $0
- $20,000 of portfolio income
- None of the above
Problem 2: Steve, who is single, has $100,000 of salary, $10,000 of income from a limited partnership, and a $25,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $100,000. Of the $25,000 loss, how much is deductible?
- $25,000
- $10,000
- $15,000
- $0
Problem 3: When comparing corporate and individual taxation, the following statements are true, except:
- Individuals have exemptions and a standard deduction; corporations do not.
- Both corporate and individual taxpayers may have a long-term capital loss carryforward.
- All taxpayers may carry net operating losses back two years, forward 20 years.
- Both types of taxpayers have percentage limitations on the charitable contribution deduction, coupled with a carryover of the excess contribution.