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. Assume that Clampett, Incorporated, never operated as a C corporation and that the corporate tax rate is 21 percent. What is Clampett, Incorporated's excess net passive income tax?

Question

Quizplus · Accepted Answer

Clampett, Incorporated's excess net passive income tax is $0 because the company has not operated as a C corporation, which is a prerequisite for the excess net passive income tax to apply. This tax is specific to S corporations that have previously been C corporations and have accumulated earnings and profits from those periods. Since Clampett, Incorporated, has never been a C corporation, it would not be subject to this tax.

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