Problem 6-25 (LO. 6) 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. a. Assuming that White is a personal service corporation, how will these transactions affect its taxable income? . Therefore, A personal service corporation is allowed to offset passive activity losses against neither active nor portfolio income White's taxable income is $ 436,000 . Feedback Check My Work The passive activity loss rules operate by requiring taxpayers to classify their income and losses into various categories. Then the rules limit the extent to which losses in the passive category can be used to offset income in the other categories. b. Assuming that White is closely held but not a personal service corporation, how will these transactions affect its taxable income? A closely held, non-personal service corporation is allowed to offset passive activity losses against active income, but not against portfolio income . Therefore, White's taxable income is $ x. Problem 6-25 (LO. 6) 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. a. Assuming that White is a personal service corporation, how will these transactions affect its taxable income? . Therefore, A personal service corporation is allowed to offset passive activity losses against neither active nor portfolio income White's taxable income is $ 436,000 . Feedback Check My Work The passive activity loss rules operate by requiring taxpayers to classify their income and losses into various categories. Then the rules limit the extent to which losses in the passive category can be used to offset income in the other categories. b. Assuming that White is closely held but not a personal service corporation, how will these transactions affect its taxable income? A closely held, non-personal service corporation is allowed to offset passive activity losses against active income, but not against portfolio income . Therefore, White's taxable income is $ x