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C-Corporation Accounting Question – Active vs. Passive vs. Portfolio Income/Loss Is there a differentiation between them?

San Jose, CA |

Consider a Closely-Held C-Corp (NOT classified as PHC/PSC!) The Corp has 3 sources and types of income. Active (Ordinary Operating Business), Passive (E.g. Rental Income) and Portfolio (E.g. Interest from investments such as Loans and Stock). The Corp employs 3 Managers per each business.
How would the accounting of such Corp look like?
Example Say there is $50K gross income from the Active biz, $100K gross income from the Passive, and another $20K income from the Portfolio biz. Assume each manager paid $50K annual salary. Would it be accurate to sum the entire gross income, deduct the salary cost and the Corp pays tax on the AGI? I.e. total gross Income = $50K + $100K + $20K = $170k deduct the managers salaries ($50K x 3 = $150K) and so the total taxable income is: $170K - $150K = $20K?

Attorney Answers 1


  1. This is an inappropriate question for AVVO. First, it is a speculative question with no potential real world answer. Second, your terms are mixed in that you are intermingling coporate tax retuns wtih individual income tax returns by using terms such as "ag.i" Third, you are asking accounting questions that would be better asked of a tax accountant.

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court.

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