The passive loss rules apply more favorably to closely held C corporations than to personal service corporations (PSCs).

Question

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The passive loss rules prohibit PSCs from offsetting passive losses against either active or portfolio income.Closely held corporations,however,may offset passive losses against active income.
A corporation is closely held if,at any time during the taxable year,more than 50% of the value of the corporation's outstanding stock is owned,directly or indirectly,by or for not more than five individuals.

The Passive Loss Rules Apply More Favorably to Closely Held