RGD Corporation Was a C Corporation from Its Inception in 2010

question 49

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. $$\begin{array} { | l | r | } \hline \text { Description } & \text { Amount } \\\hline \text { Consulting revenue } & \$ 120,000 \\\hline \text { Salary to owners } & ( 50,000 ) \\\hline \text { Employee wages } & ( 40,000 ) \\\hline \text { Depreciation expense } & ( 8,000 ) \\\hline \text { Long-term capital gain } & 10,000 \\\hline \text { Interest income } & 50,000 \\\hline \text { Dividend income } & \underline { 40,000 } \\\hline \text { Overall net income } & \mathbf { \$ 1 2 2 , 0 0 0 } \\\hline\end{array}$$ 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).

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Definitions:

Operant Conditioning

A learning process through which the strength of a behavior is modified by reinforcement or punishment.

Behavioral Perspective

An approach in psychology focusing on observable behaviors and how environmental interactions shape them.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired; a response that is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.

Self-Efficacy

The belief we have in our ability to succeed in a specific task or situation.