RGD Corporation Was a C Corporation from Its Inception in 2010

question 14

Essay

RGD Corporation was a C corporation from its inception in 2010 through 2013. However, it elected S corporation status effective January 1, 2014. RGD had $50,000 of earnings and profits at the end of 2013. RGD reported the following information for its 2014 tax year. $$\begin{array} { | l | r | } \hline \text { Description } & \text { Amount } \\\hline \text { Consulting revenue } & \mathbf { \$ 9 9 , 0 0 0 } \\\hline \text { Salary to owners } & ( 40,000 ) \\\hline \text { Employee wages } & ( 30,000 ) \\\hline \text { Depreciation expense } & ( 5,000 ) \\\hline \text { Municipal bond interest } & 6,000 \\\hline \text { Interest income } & 42,000 \\\hline \text { Dividend income } & \underline { 25,000 } \\\hline \text { Overall net income } & \mathbf { \$ 9 7 , 0 0 0 } \\\hline\end{array}$$ What amount of excess net passive income tax is RGD liable for in 2014? (Round your answer for excess net passive income to the nearest thousand).

---

Definitions:

Time Utility

The value added to products or services by making them available at the right time to meet consumer needs.

Multitouch

A technology that enables a surface (such as a touchscreen) to recognize the presence of more than one point of contact with the surface simultaneously.

Goodwill

The intangible asset that arises when a business is acquired for more than the fair value of its visible, tangible assets; often related to the brand reputation, customer loyalty, and other factors not directly quantifiable.

Production

The act of producing goods and services by merging workforce, materials, and technology.