An S Corporation with Substantial AEP Has Operating Revenues of $410,000

question 103

Multiple Choice

An S corporation with substantial AEP has operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. The passive income penalty tax payable, if any, is:

• A) $0.
• B) $40,923.
• C) $116,923.
• D) $136,500.
• E) None of the above.

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Definitions:

Corporate Income Tax

Taxes imposed on the net income of corporations.

Proprietorship

A business owned and operated by a single individual, where there is no legal distinction between the owner and the business entity.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Expected Inflation

The rate at which the general level of prices for goods and services is anticipated to rise over a specific period.