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:

Representativeness Heuristic

The tendency to judge the frequency or likelihood of an event by the extent to which it resembles the typical case.

Actor/observer Bias

The tendency to attribute one's own actions to external factors while attributing others' actions to their character or disposition.

Heuristics

Mental shortcuts or rules of thumb that simplify decision-making processes but sometimes lead to biased or inaccurate judgments.

Intentions

Planned or desired outcomes that an individual seeks to achieve through specific actions.