Neal Corporation Was Initially Formed as a C Corporation with a Calendar

question 108

Essay

Neal Corporation was initially formed as a C corporation with a calendar year-end.Neal elected S corporation status, effective January 1, 2019.On December 31, 2018, Neal Corp.reported earnings and profits of $150,000.Beginning in 2019, Neal Corp.reported the following information.Does Neal Corp.'s S election terminate due to excess net passive income? If so, what is the effective date of the termination?
$\begin{array}{c}\begin{array}{lll}\\\\\text {Year}\\2019\\2020\\2021\\2022\\2023\\\end{array}\begin{array}{c}\text {Gross receipts (including passive }\\\text {investment income)}\\\$ 400,000 \\\$ 300,000 \\\$ 500,000 \\\$ 400,000 \\\$ 600,000\end{array}\begin{array}{lll}\text {Passive}\\\text {investment}\\\text {income}\\ \$ 120,000\\\$ 70,000\\ \$ 130,000\\\$ 110,000\\\$155,000\end{array}\begin{array}{lll}\text {Corporate earnings}\\ \text {and profits}\\\text { (end of year)}\\\$ 140,000 \\ \$ 100,000 \\ \$ 70,000 \\ \$ 40,000 \\ \$ 1,000\end{array}\end{array}$

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Definitions:

Customer Satisfaction Measure

Metrics or tools used to evaluate the degree to which a product or service meets or exceeds the expectations of its customers.

Staffing Efforts

The activities involved in identifying, acquiring, and managing personnel to meet an organization's needs.

Customer Satisfaction

The measurement of how products or services supplied by a company meet or exceed the expectation of its customers.

Greater Effectiveness

Achieving enhanced performance or outcomes in a more efficient, productive manner.