DEF Corporation has been operating as a C corporation. It elected to become an S corporation, effective January 1, 2020. At the time of conversion to S corporation status, DEF had a net unrealized built-in gain (on all its assets) of $200,000. One of its assets was a parcel of land that had a FMV of $400,000 and tax basis of $250,000 as of 1/1/20. During 2020, DEF sold the parcel of land for $350,000. How much built-in gains tax must DEF pay in 2020 (Assume its taxable income if it were still a C corporation was $10 miilion)?

DEF Corporation has been operating as a C corporation. It elected to become an S corporation, effective January 1, 2020. At the time of conversion to S corporation status, DEF had a net unrealized built-in gain (on all its assets) of $200,000. One of its assets was a parcel of land that had a FMV of $400,000 and tax basis of $250,000 as of 1/1/20. During 2020, DEF sold the parcel of land for $350,000. How much built-in gains tax must DEF pay in 2020 (Assume its taxable income if it were still a C corporation was $10 miilion)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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