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:

Variable Cost

Costs that change in proportion to the level of production or sales, such as materials and labor.

Capacity

The maximum amount of work that an organization, system, or machine can produce in a given period.

Multiproduct Break-Even

An analysis used to determine the point at which total revenue equals total costs for multiple products, indicating no profit or loss.

Weighted Contribution

A calculation that assigns different weights or importance to various items or activities based on their contribution to the total.