Tom and Shawn own all of the outstanding stock of Brady Corporation (a retail store operated as a C corporation). This year, Brady generates taxable income of $20,000 from active business operations, and also reports investment interest income of $22,000 and losses of $28,000 from a passive activity. As a result, Brady Corporation reports
A) net income of $42,000.
B) interest income of $22,000 and a passive loss carryover of $8,000.
C) business income of $20,000 and a passive loss carryover of $6,000.
D) business income of $20,000, interest income of $22,000, and a passive loss carryover of $28,000.
B) interest income of $22,000 and a passive loss carryover of $8,000.
Because Brady is a closely held C corporation, the $20,000 of active business income may be offset by $20,000 of the passive loss. The remaining $8,000 loss may be carried over. The investment interest of $22,000 is currently taxable.
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