Reference no: EM133198254
Virginia Corporation is a calendar-year corporation. At the beginning of 2021, its election to be taxed as an S corporation became effective. Virginia Corporation's balance sheet at the end of 2020 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
|
$ 21,250
|
$ 21,250
|
|
Accounts receivable
|
41,500
|
41,500
|
|
Inventory
|
92,750
|
205,250
|
|
Land
|
160,000
|
186,000
|
|
Totals
|
$ 315,500
|
$ 454,000
|
In 2021, Virginia Corporation reported business income of $52,500 (this would have been its taxable income if it were still a C corporation).
What is Virginia's built-in gains tax in each of the following alternative scenarios?
a. During 2021, Virginia Corporation sold inventory it owned at the beginning of the year for $103,250. The basis of the inventory sold was $57,250. What is its built-in gains tax in 2021?
Built in gain tax _________________
b. Assume the original facts except Virginia Corporation had a net operating loss carryover of $25,000 from its time as a C corporation.
Built in gain tax _________________
c. Assume the original facts except Virginia Corporation is a C corporation, and its taxable income was $2,000.
Built in gain tax______________________