RGD Corporation Was a C Corporation from Its Inception in 2012

question 59

Essay

RGD Corporation was a C corporation from its inception in 2012 through 2015. However, it elected S corporation status effective January 1, 2016. RGD had $50,000 of earnings and profits at the end of 2015. RGD reported the following information for its 2016 tax year. $$\begin{array} { | r | r | r | r | } \hline \text { Yea } & \begin{array} { r } \text { Gross Receipts(including } \\\text { passive investment } \\\text { income) }\end{array} & \begin{array} { r } \text { Passive } \\\text { imvestment } \\\text { income }\end{array} & \begin{array} { r } \text { Corporate } \\\text { Eamings } \\\text { and Profits } \\\text { (end of year) }\end{array} \\\hline 2016 & \$ 400,000 & \$ 120,000 & \$ 140,000 \\\hline 2017 & \$ 300,000 & \$ 70,000 & \$ 100,000 \\\hline 2018 & \$ 500,000 & \$ 130,000 & \$ 70,000 \\\hline 2019 & \$ 400,000 & \$ 110,000 & \$ 40,000 \\\hline 2020 & \$ 600,000 & \$ 155,000 & \$ 1,000 \\\hline\end{array}$$ What amount of excess net passive income tax is RGD liable for in 2016? (Round your answer for excess net passive income to the nearest thousand)

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Definitions:

Hysteresis

The phenomenon in which the state of a material lags behind changes in the effect causing it, such as the lagging of magnetic flux density behind the magnetizing force.

Spike Suppression

Techniques or devices used to protect electronic circuits from sudden transient voltages, which could cause damage or malfunction.

Metal Oxide Varistor

A voltage-dependent resistor with a nonlinear variance, used to protect electrical circuits from voltage spikes.

Inductance

The property of an electrical conductor by which a change in current flowing through it induces an electromotive force in both the conductor itself and in any nearby conductors by mutual inductance.