If an S Corporation Never Operated as a C Corporation

question 12

True/False

If an S corporation never operated as a C corporation, it may earn passive investment income without fear of an involuntary S election termination.

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Definitions:

Current Monetary Assets

Assets that are cash or can be quickly converted to cash, including currency, bank account balances, and short-term investments.

Plant and Equipment

Long-term assets used in the operation of a business, such as machinery, buildings, and vehicles.

Goodwill Impairment

A charge that companies record when the value of goodwill on the balance sheet exceeds its fair value, indicating that the asset is overvalued.

Functional Currency

The currency of the primary economic environment in which an entity operates and carries out its transactions.