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ACC - Lockhart Corporation

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Question;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).;1.;During 2013, Lockhart;sold all of the inventory it owned at the beginning of the year for $250,000.;What is its built-in gains tax in 2013? Be sure to show your work.;2.;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.;3.;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.

 

Paper#41193 | Written in 18-Jul-2015

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