Matulis, Inc., a C corporation, owns a single asset with a basis of $363,200 and a fair market value of $871,680. Matulis elects S corporation status. Matulis holds a positive E & P balance. The entity elects S corporation status for 2020 and then sells the asset. Compute the corporate-level built-in gains tax that must be paid by Matulis. If required, round your answer to the nearest dollar.

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.