Reference no: EM132873453

Question 1: LA Corporation operated as a C Corporation for many years. On? January? 1, 2017 LA Corporation made an election to be an S Corporation. Lilah owns? 100? % of the stock of LA Corporation. On? January? 1, 2017? LA? Corporation's only asset was a piece of land held for investment. At that date the land had a fair market value? of? $1,000,000 and a tax basis? of? $400,000 . On December? 1? ,? 2020? , the land was sold? for? $1,500,000. What built in gains tax will LA Corporation pay in 2020 and what amount of capital gain from will LA Corporation report to Lilah on her? K-1?

Option 1: Built in gains taz? $0 ;? K-1 capital gain? $1,100,000

Option 2: Built in gains tax? $231,000 ;? K-1 capital gain? $1,100,000

Option 3: Built in gains tax? $126,000 ;? K-1 capital gain? $1,100,000

Option 4: Built in gains tax? $126,000 ;? K-1 capital gain? $974,000