An S corporation election may be terminated if the corporation has excessive passive investment income.An example of what is not passive investment income is

Question

Quizplus · Accepted Answer

Room rents paid to a hotel are considered active income and not passive investment income, therefore they would not contribute to the excessive passive investment income that could trigger the termination of an S corporation election. The other options all involve income from investments or passive activities, which could be considered passive investment income.

An S Corporation Election May Be Terminated If the Corporation