[trk85718]

This question comes from a Becker mock exam Sim. The fact pattern is below. According to Becker answer Brian Actively participates in Tech Plus Inc. and thus the Income is deemed to be active and a passive loss cannot offset it. Anyone have any guidance that illustrates what exactly constitutes “Active” participation in a S Corp? Is it just because he is getting a salary?

In addition, since Year 1, Brian has owned a 50% interest in Technology Plus Inc., an S Corporation from which he was paid a salary and received distributions in Year 4 (each paid according to the ratio of ownership). Brian is also a 10% limited partner in Wonderland Resorts, a limited liability partnership, which paid him no distributions in Year 4 and in which he had a $300,000 basis at year-end Year 3.

[Recked]

Yes, the salary makes him an active participant in the S-corp, operating under the assumption that the salary is in exchange for services of some kind.

[Author]

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