An S corporation with substantial AEP has operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000.The passive income penalty tax payable, if any, is:

Question

Quizplus · Accepted Answer

First, we need to calculate the AEP (Accumulated Earnings and Profits) of the S corporation:
Operating Revenues = $410,000
Operating Expenses = $260,000
Taxable Interest Income = $390,000
AEP = Operating Revenues - Operating Expenses - Taxable Interest Income = $410,000 - $260,000 - $390,000 = -$240,000
Since the AEP is negative, there is no passive income penalty tax payable. Therefore, the answer is B) $0.

An S Corporation with Substantial AEP Has Operating Revenues of $410,000