Which of the Following S Corporations Would Be Subject to the Excess

question 14

Multiple Choice

Which of the following S corporations would be subject to the excess net passive income tax?

• A) 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.
• B) An S corporation that has previously distributed all earnings and profits from prior C corporation years.
• C) 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.
• D) An S corporation that never operated as a C corporation.
• E) None of the choices are correct.

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Definitions:

Endochondral

Referring to the process where bone tissue is preceded by cartilage that then ossifies to form bone.

Intramembranous

Pertaining to a type of bone development in which bones form directly within connective tissue without first being cartilage.

Diaphysis

The core segment of an elongated bone.

Epiphyseal Lines

The remnants of the epiphyseal plate in long bones, seen in adults, indicating the previous site of longitudinal growth during childhood and adolescence.