Problem $11-46($LO$.3)$

In the current year, White, Inc., earns $$400,000$ from operations and receives $$36,000$ of interest income from various portfolio investments. White also pays $$150,000$ to acquire a $20\%$ interest in a passive activity that produces a total $$200,000$ loss.

Question Content Area

a$.$Assuming that White is a personal service corporation, how will these transactions affect its taxable income?

A personal service corporation is allowed to offset passive activity losses against

both active and portfolio incomeactive income, but not against portfolio incomeportfolio income, but not against active incomeneither active nor portfolio incomeneither active nor portfolio income

$.$ Therefore, White's taxable income is