Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $450,000, taxable interest of $425,000,...

 

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Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $450,000, taxable interest of $425,000, operating expenses of $150,000, and deductions attributable to the interest income of $70,000. Calculate any passive investment income penalty tax payable by this corporation. Gene Grams is a 55% owner of a calendar year S corporation during the tax year. His beginning stock basis is $250,000, and the S corporation reports the following items. Ordinary income Short-term capital gain § 1231 loss Calculate Grams's stock basis at year-end. $75,000 16,000 6,000 Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $450,000, taxable interest of $425,000, operating expenses of $150,000, and deductions attributable to the interest income of $70,000. Calculate any passive investment income penalty tax payable by this corporation. Gene Grams is a 55% owner of a calendar year S corporation during the tax year. His beginning stock basis is $250,000, and the S corporation reports the following items. Ordinary income Short-term capital gain § 1231 loss Calculate Grams's stock basis at year-end. $75,000 16,000 6,000

Answer rating: 100% (QA)

SOLUTION 1 To calculate the passive investment income penalty tax payable by Pepper Inc we need to follow these steps Step 1 Calculate the corporations net passive investment income Net passive investment income taxable interest deductions attributable to the interest income Net passive investment income 425000 70000 355000 Step 2 Calculate the corporations taxable income Taxable income revenues operating expenses deductions any applicable deductions for qualified business income QBI Taxable income 450000 150000 70000 230000 Step 3 Determine if the corporation ... View the full answer