Final answer:
True. An S corporation with no prior history as a C corporation will never fail the excess passive investment income test and lose its S status.So the statement is ture.
Step-by-step explanation:
An S corporation with no prior history as a C corporation will never fail the excess passive investment income test and lose its S status.
To maintain S corporation status, a corporation must satisfy certain criteria, one of which is the passive investment income test.
This test limits the amount of passive income an S corporation can have in relation to its gross receipts.
However, for a corporation that has never been a C corporation, there is no prior excess passive investment income to be compared against, so it will automatically meet this test.
In simpler terms, because a corporation that starts off as an S corporation has never been a C corporation, there is no risk of it failing the excess passive investment income test and losing its S status.
So the statement is ture.