Pepper, Inc., an S corporation in Norfolk, Virginia, has revenues of $400,000, taxable interest of $380,000, operating expenses of $250,000, and deductions attributable to the interest income of $140,000. What is Pepper's passive income penalty tax payable, if any?

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To calculate the passive income penalty tax, we need to first determine Pepper's taxable income:
$400,000 (revenues) + $380,000 (taxable interest) - $250,000 (operating expenses) - $140,000 (deductions attributable to interest income) = $390,000 (taxable income)
Next, we need to determine the amount of passive income:
$380,000 (taxable interest) - $140,000 (deductions attributable to interest income) = $240,000 (passive income)
Since Pepper is an S corporation, it is subject to a penalty tax on its passive income if it exceeds 25% of its taxable income. In this case, Pepper's passive income ($240,000) is 61.54% of its taxable income ($390,000), which exceeds the 25% threshold. Therefore, Pepper is subject to a penalty tax of:
($240,000 - 25% x $390,000) x 34% (the corporate tax rate) = $40,895