Sweetwater, Inc., is an S corporation in Sour Lake, Texas.
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 $17,000 for the year. find out any passive investment income penalty tax.
b. In part (a), what if taxable income were $39,000?
c. If this will be the third consecutive year the company may be subject to the penalty tax on excessive passive investment income, what could Sweetwater do before the end of the year to avoid the tax?