In: Finance
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?
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