Casey organized Midwest Corporation 15 years ago. The corporation made an S election last year after it accumulated $90,000 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?

Answer rating: 100% (QA)

A Yes North is subject to the excess net passive income tax The tax li... View the full answer