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

question 10

Essay

Neal Corporation was initially formed as a C corporation with a calendar year-end. Neal elected S corporation status, effective January 1, 2020. On December 31, 2019, Neal Corporation reported earnings and profits of $150,000. Beginning in 2020, Neal Corporation reported the following information. Does Neal Corporation's S election terminate due to excess net passive income? If so, what is the effective date of the termination?

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Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, often used to measure the volatility of financial returns.

Diversification

An investment strategy that involves spreading investments among various financial instruments, industries, and other categories to reduce exposure to any one particular asset or risk.

Market Portfolio

A theoretical portfolio of investments that contains all available assets in the market, representing the entire market.

Single-Index Model

A simplified way to model the returns of a security or portfolio with respect to the returns of the overall market, using only the market index as the explanatory variable.