ABC CorpElected to Be Taxed as an S Corporation When It

question 106

Essay

ABC Corp.elected to be taxed as an S corporation when it was initially formed.During its first three years of existence, it reported passive investment income in excess of 25 percent of its gross receipts.Is ABC's S election terminated under the excess passive investment income test? If so, what is the effective date of the termination? If not, why not?

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Definitions:

Financial Calculation

The process of crunching numbers to determine outcomes related to investments, savings, profitability, and other financial metrics.

Daily Interest

Interest amount that is calculated and accrued on a daily basis, typically used in various financial contexts to determine the amount earned or owed each day.

Sales Tax

A consumption tax imposed by the government on the sale of goods and services, typically calculated as a percentage of the purchase price.

Percentage

A rate, number, or amount in each hundred, often used to express a proportion of a whole.