S Corporation elected S corporation status beginning in 2010 and will have Subchapter C earnings and profits at the close of the current taxable year. This year, S expects that its business operations and investments will produce the following tax results:

Gross income from operations - $75,000 Business deductions - $60,000 Tax-exempt interest - $23,000 Dividends - $12,000 Long-term capital gain from the sale of investment real property - $35,000 (a) Is S Corporation subject to the Section 1375 tax on passive investment income? If so, compute the amount of the tax.

(b) Same as (a), above, except that S receives an additional $5,000 of tax-exempt interest.