### Question
How is the term excess net passive income defined?


### Answer
The term **excess net passive income** is defined in *26 U.S.C. § 1375* as the following:

> an amount which bears the same ratio to the net passive income for the taxable year as—


(i) the amount by which the passive investment income for the taxable year exceeds 25 percent of the gross receipts for the taxable year, bears to


(ii) the passive investment income for the taxable year

#### Citation:
  - *26 U.S.C. § 1375*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter S-Tax Treatment of S Corporations and Their Shareholders > PART III-SPECIAL RULES**

