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A C corporation withh earnings and profits elects S corporation status in 20X1 and has the...

A C corporation withh earnings and profits elects S corporation status in 20X1 and has the following:

Gross Receipts $100,000

Passive investment income $60,000

Expenses directly related to the passive investment income $10,000

Taxable income if the corporation had been a C corporation $30,000

A) 20,000

B) $29,167

C) $30,000

D)$50,000

What is the excess net passive investment income?

Solutions

Expert Solution

Excess Net Passive Investment Income = {Gross PII – (Gross Receipt * 25%) / Gross PII} * Net PII

PII means Passive Investment Income

Total

Passive

Non Passive

Gross Receipt

100000

60000

40000

- Passive expense

-10000

Net PII

50000

Excess Net Passive Investment Income = {Gross PII – (Gross Receipt * 25%)} / Gross PII * Net PII

= {60000 – (100000*25%)}/ 60000 * 50000

= {60000 – 25000} / 60000 * 50000

= 35000 / 60000 * 50000

= 29167

jeff jeffy answered 3 years ago
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