Calculate any passive investment income tax penalty

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Question - Sweetwater Inc is an S corporation

a. In 2012 Sweetwater's excess net passive income is $42,000. Sweetwater holds $31,000 of accumulated earnings and profits from a C corporation year. It reports $58,000 of taxable income and AMT adjustments of of $17,000 for the year. Calculate any passive investment income tax penalty.

b. In part (a), what if taxable income were $39,000?

c. If this will be the third consective year the company may be subject to the penalty tax on excessive passive investment income, what could Sweetwater do before the end of year to avoid the tax?

Reference no: EM131872644

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