Excess net passive income tax worksheet. Summary: This is an example of the worksheet used to determine any excess net passive income for a corporation to enter on line 22a of Form 1120S. The line items to be completed are:

“1. Enter gross receipts for the tax year (see section 1362(d)(3)(B) for gross receipts from the sale of capital assets)” field Footnote: Income and deductions on lines 1, 2, and 5 are from total operations for the tax year. This includes applicable income and expenses from page 1, Form 1120S, as well as those reported separately on Schedule K. See section 1375(b)(4) for an exception regarding lines 2 and 5.

“2. Enter passive investment income as defined in section 1362(d)(3)(C)” field Footnote: Income and deductions on lines 1, 2, and 5 are from total operations for the tax year. This includes applicable income and expenses from page 1, Form 1120S, as well as those reported separately on Schedule K. See section 1375(b)(4) for an exception regarding lines 2 and 5.

“3. Enter 25% of line 1 (If line 2 is less than line 3, stop here. You are not liable for this tax.)” field

“4. Excess passive investment income--Subtract line 3 from line 2” field

“5. Enter deductions directly connected with the production of income on line 2 (see section 1375(b)(2))” field Footnote: Income and deductions on lines 1, 2, and 5 are from total operations for the tax year. This includes applicable income and expenses from page 1, Form 1120S, as well as those reported separately on Schedule K. See section 1375(b)(4) for an exception regarding lines 2 and 5.

“6. Net passive income--Subtract line 5 from line 2” field

“7. Divide amount on line 4 by amount on line 2 (percent)” field

“8. Excess net passive income--Multiply line 6 by line 7” field

“9. Enter taxable income (see instructions for taxable income below)” field

“10. Enter smaller of line 8 or line 9” field

“11. Excess net passive income tax--Enter 35% of line 10. Enter here and on line 22a, page 1, Form 1120S” field