Lava Corporation elected S corporation status on 1/1/2014, the basis and FMV of

Question

Lava Corporation elected S corporation status on 1/1/2014, the basis and FMV of the assets of Lava on the date of S election were as follows:

                               Basis                           FMV

Fixed Assets           40,000                          30,000

Building                  100,000                      175,000

Goodwill                     -                              300,000

In 2014, Lava sells the building for $200,000. Lava’s 2014 income if it were a C corporation would be $65,000. Calculate the built in gains tax for 2014.

Explanation / Answer

amount realised=505000

basis of "s"assets=(140000)

include income=200000

buit in gain tax=565000

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