Beach Wear Inc. (BWI) invested in common stock of another corporation, Apple Computer, which represented a fractional interest in the company. BWI elected S Status beginning January 1, of the year specified for the exam. BWI purchased the Apple stock for $300,000 in January, 10 years ago. On December 31, of last year, the stock was still worth $300,000. On December 30, the same specified year, the stock was sold for $900,000. BWI had earnings on profits as a C Corporation of $600,000 on December 31, last year. BWI had the following item of income and expenses for December 31, this specified year.

Operational Income $1,155,000

Tax Exempt Income $45,000

Gain from sale of Apple Stock $600,000

Total Income $1,800,000

Operational Expense $600,000

Depreciation $15,000

Investment Advice $18,000

Interest Expense $117,000

Total Expenses $750,000

Total Net Income $1,050,000

a. Build-in gains tax is due.

b. Non passive investment income tax is due.

c. Passive investment income tax is due since the gains from the stock and tax exempt income totaling $645,000 are more than 25% of the $1,800,000 gross receipts.

d. None of the above.

please explain why you choose this answer.