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

question 23

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 30% 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 22% of its gross receipts.
• E) None of the choices are correct.

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Definitions:

Treasury Stock

These are the repurchased shares held by the issuing company, removing them from the market but not from existence.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the owners' claim on the company's assets.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership stake of its shareholders.

Treasury Stock

Shares that were issued by a company but have been reacquired and are held in the company's treasury.