Lockhart Corporation is a calendar year corporation

Question: #511

Lockhart Corporation is a calendar-year corporation. At the beginning of 2013, its election to be taxed as an S corporation became effective. Lockhart Corp.'s balance sheet at the end of 2012 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	$?35,000	$?35,000
Accounts receivable	?? 25,000	??25,000
Inventory	?180,000	? 210,000
Land	? 125,000	? 120,000
Totals	$365,000	$390,000

Lockhart's business income for the year was $65,000 (this would have been its taxable income if it were a C corporation).

During 2013, Lockhart sold all of the inventory it owned at the beginning of the year for $250,000. What is its built-in gains tax in 2013? Be sure to show your work.
Assume the same facts as in part (1), except that if Lockhart were a C corporation, its taxable income would have been $17,000. What is its built-in gains tax in 2013? Be sure to show your work.
Assume the original facts except the land was valued at $115,000 instead of $120,000. What is Lockhart's built-in gains tax in 2013?

Solution: #606

Lockhart Corporation is a calendar-year corporation Complete Solution

taxable income would have been $17,000. What is its built-in gains tax in 2013?

Answer: If, however, the corporation’s taxable income was only $17000, then $8000 ($25000 – $17000)...