Question

Assume that Clampett, Inc. 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, Inc. never operated as a C corporation and that the corporate tax rate is 21%. What is Clampett, Inc.'s excess net passive income tax?
A- 0
B- $21,000
C- $75,000
D- $100,000
E- None of these choices are correct

Answer 1

Answer:

B $21,000

Explanation:

Given that;

Sales = $200,000

Cost of goods sold = $150,000

Interest income = $60,000

Dividends = $40,000

Tax rate = 21%

Then,

Net passive income tax = Net passive income × Tax rate

Or

= (Interest income + Dividends) × Tax rate

= ($60,000 + $40,000) × 21%

= $21,000