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Clampett, Incorporated, converted to an S corporation on January 1, 2020. At that time, Clampett, Incorporated, had cash ($54,000), inventory (FMV $74,000, basis $37,000), accounts receivable (FMV $54,000, basis $54,000), and equipment (FMV $74,000, basis $94,000). In 2021, Clampett, Incorporated, sells its entire inventory for $74,000 (basis $37,000). Assume the corporate tax rate is 21 percent. Clampett, Incorporated's taxable income in 2021 would have been $1,000,000 if it had been a C corporation. How much built-in gains tax does Clampett, Incorporated, pay in 2021

Sagot :

Answer:

$3,570

Explanation:

Particulars                        FMV             Basis                Differences

Inventory                      $74,000           $37,000              $37,000

Accounts receivable   $54,000           $54,000               $0

Equipment                   $74,000            $94,000              -$20,000

Taxable gain                                                                        $17,000

Tax rate = 21%

So, Built-in gains tax = Taxable gain × tax rate

= $17,000 × 21%

= $3,570

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