Catfish, Inc How Much of Catfish's Share of Trout's Loss May It

question 1

Multiple Choice

Catfish, Inc., a closely held corporation which is not a PSC, owns a 45% interest in Trout Partnership, which is classified as a passive activity.Trout's taxable loss for the current year is $250,000.During the year, Catfish receives a $60,000 cash distribution from Trout.Other relevant data for Catfish are as follows. $\begin{array}{lr}\text { Net income from operations } & \$ 800,000 \\\text { Dividend income } & 25,000 \\\text { Rent income } & 20,000\end{array}$ How much of Catfish's share of Trout's loss may it deduct in calculating its taxable income?

• A)$0
• B)$20,000
• C)$45,000
• D)$112,500

---

Definitions:

Course of Dealing

The history of past business transactions between parties that establishes a common basis for their understanding and expectations.

Citrus Orchard

An area of land dedicated to the cultivation of citrus trees, such as oranges, lemons, limes, and grapefruits, for fruit production.

Distribution Center

A warehouse or storage facility where goods are stored before they are distributed to retailers or customers.

Purchase Order

A purchase order is a formal document sent by a buyer to a seller to authorize the purchase of goods or services at agreed terms and conditions.