Question
Oliver organized North Corporation 15 years ago. The corporation made an S election last year after it accumulated $60,000 of E&P as a C Corporation.
Oliver organized North Corporation 15 years ago. The corporation made an S election last year after it accumulated $60,000 of E&P as a C Corporation. As of Decembr 3 of the ccurrent year, the corportion has distributed none of its accumulated E&P. In the current year, North reportrs the following results:
Dividentds from Domestic Corporations 60,000
Rental Income 100,000
Servics income 50,000
Expenses related to rental income 30,000
Expenses related to services income 15,000
Other expenses 5000
The corp has not provided significant services nor incurred substantial costs in connection with earning rental income. The services income is derived from the active conduct of a trade or business.
A. Is North subject to the excess net passive income tax? If so, what is the tax liability?
B What is the effect of the excess net passive income tax liability on Norths passthroughs of ordinary income and seperately stated items?
C. What advice would you give North regarding its activitites?
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