S Corporation Rental Income Not Passive Except When It Is Peter J. Reilly reports at Forbes: Private Letter Ruling 201118011   A C corporation is a taxable entity.  Distributions that it makes to its shareholders are also, generally, taxable to them.  People who don’t want to pay tax twice on the same income will make an S election.  The shareholders are taxed on whatever the earnings are regardless of distributions.  Distributions of those earnings will generally not be taxable.  It’s pretty easy if the corporation made the election effective day one of its existence.  Former C corporations have other problems.  If…