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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
E1

Transcribed Image Text:Blue Corp. previously operated as a C
corporation. At the beginning of 2020, Blue
Corp. made a valid S corporation election. At
the time of the election, Blue Corp. had
accumulated E&P of $20,000 and also owned
the following assets:
Land A: FMV = $100,000, AB = $50,000
Land B: FMV = $100,000, AB = $105,000
Land C: FMV = $100,000, AB = $5,000
Land D: FMV = $100,000, AB = $200,000
a) If Blue Corp. sells Land A for $130,000 and
Land B for $1o00,000 in 2020, what is the
amount of Blue Corp.'s built-in gain tax
liability?
b) If Blue Corp. sells Land A for $130,000 and
Land B for $100,000 in 2020, what is the total
amount of gain from the sale of Land A and
Land B that is allocated to Blue Corp.'s
shareholder(s)?
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