Which of the following S corporations would be subject to the excess net passive
ID: 2515962 • Letter: W
Question
Which of the following S corporations would be subject to the excess net passive income tax?
Multiple Choice
An S corporation that never operated as a C corporation.
An S corporation that has previously distributed all earnings and profits from prior C corporation years.
An S corporation with no earnings and profits from prior C corporation years and with passive investment income that exceeds 30% of its gross receipts.
An S corporation with $2,000 of earnings and profits from prior C corporation years and with passive investment income that equals 22% of its gross receipts.
None of the choices are correct.
Explanation / Answer
None of the choices are correct.
The excess net passive income tax applies when the S corporation passive income for the tax year that exceeds 25% of its gross receipts.
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