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

question 130

Multiple Choice

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

• A)An S corporation that never operated as a C corporation.
• B)An S corporation that has previously distributed all earnings and profits from prior C corporation years.
• C)An S corporation with no earnings and profits from prior C corporation years and with passive investment income that exceeds 30percent of its gross receipts.
• D)An S corporation with $2,000 of earnings and profits from prior C corporation years and with passive investment income that equals 22percent of its gross receipts.
• E)None of the choices are correct.

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Definitions:

Current Asset

An asset on a company's balance sheet that is expected to be converted into cash within one year or one business cycle, whichever is longer.

Statement of Cash Flows

A financial report that summarizes the amount of cash and cash equivalents entering and leaving a company.

Operating Activities

Activities directly related to the primary business operations, including revenue generation and expenses directly tied to the core business functions.

Indirect Method

A way of calculating cash flows from operating activities by adjusting net income for changes in non-cash accounts.