the amount of his or her contributions.
Application of the Section 181 Deduction
The production activity should constitute a “trade or business”, therefore, the Section 181 deduction would be subject to the passive income/loss rules. Individuals and personal service corporations that do not “materially participate” in an activity (regular, continuous and substantial participation in the activity) can only deduct passive losses to the extent of “passive income.” Passive income generally includes income from real estate and other passive investments, and will include the income from the film, television show, etc. produced. Any passive losses not used can be carried forward and offset against passive income in subsequent years, or may be deductible against ordinary income if the loss is “freed up” (i.e., by sale or disposition of the passive activity asset). This