2024 – Lockhart Corporation is a calendar year corporation At the beginning of 2013 its election
Lockhart Corporation Is A Calendar-year Corporation. At The Beginning Of 2013, Its Election To Be Taxed As An S Corporation Became Effective. Lockhart Corp.’s Balance Sheet At The End Of 2012 Reflected The Following Assets – 2024
Lockhart Corporation is a calendar-year corporation. At the beginning of 2013, its election to be taxed as an S corporation became effective. Lockhart Corp.’s balance sheet at the end of 2012 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation):
Asset |
Adjusted Basis |
FMV |
Cash |
$35,000 |
$35,000 |
Accounts receivable |
25,000 |
25,000 |
Inventory |
180,000 |
210,000 |
Land |
125,000 |
120,000 |
Totals |
$365,000 |
$390,000 |
Lockhart’s business income for the year was $65,000 (this would have been its taxable income if it were a C corporation).
- During 2013, Lockhart sold the entire inventory it owned at the beginning of the year. What is its built-in gains tax in 2013? Be sure to show your work.
- Assume the same facts as in part (1), except that if Lockhart were a C corporation, its taxable income would have been $17,000. What is its built-in gains tax in 2013? Be sure to show your work.
- Assume the original facts except the land was valued at $115,000 instead of $120,000. What is Lockhart’s built-in gains tax in 2013? Be sure to show your work.
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