Assume that Clampett, Incorporated, has $200,000 of sales, $150,000 of cost of goods sold, $60,000 of interest income, and $40,000 of dividends. What is Clampett, Incorporated's excess net passive income?

Question

Quizplus · Accepted Answer

Excess net passive income is calculated as passive income minus related expenses. Here, passive income is $60,000 (interest income) and $40,000 (dividends), totaling $100,000. The cost of goods sold is $150,000, which is related to active income (sales), not passive income. Therefore, the excess net passive income is $100,000 (passive income) - $75,000 (50% of sales-related expenses, assuming expenses are allocated proportionally), resulting in $25,000.

Assume That Clampett, Incorporated, Has $200,000 of Sales, $150,000 of Cost