built-in_gains_tax - c. In 2010, the building is sold for...

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TAX 5015 Chapter 12: Built-in gains tax Built-in gains tax . Crew Corporation elects S status effective for tax year 2008. As of January 1, 2008, Crew’s assets were appraised as follows. Unrealized Adjusted Basis Fair Value Gain or (loss) Cash Accounts receivable Inventory (FIFO) Investment in land Building Goodwill $ 16,010 -0- 70,000 110,000 220,000 -0- $ 16,010 55,400 90,000 195,000 275,000 93,000 55,400 20,000 85,000 55,000 93,000 Net unrealized gain or loss 308,400 Required : In each of the following situations, calculate any built-in gains tax, assuming that the highest corporate tax rate is 35%. C corporation taxable income would have been $100,000. a. During 2008, Crew collects $40,000 of the accounts receivable and sells 80% of the inventory for $99,000. b. In 2009, Crew sells the land held for investment for $203,000.
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Unformatted text preview: c. In 2010, the building is sold for $270,000. Solution : a. Inventory: Fair value ($90,000 x 80%) $72,000 Adjusted basis ($70,000 x 80%) (56,000) Built-in gain realized $16,000 Collection of receivables 40,000 Built-in gain $56,000 Tax rate x 35% BIG tax liability $19,600 b. $195,000 $110,000 = $85,000 x 35% = $29,750 (BIG tax liability). Fair value AB Built-in gain c. $270,000 $220,000 = $50,000 x 35% = $17,500 (BIG tax liability. Selling price AB Built-in gain The following information is reported to S shareholders on Crews Schedule K : 2008: BIG ($56,000 - $19,600) $36,400 2009: BIG ($85,000 - $29,750) $55,250 2010: BIG ($50,000 - $17,500) $32,500...
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This note was uploaded on 09/09/2011 for the course TAX 5015 taught by Professor Kelliher,c during the Spring '08 term at University of Central Florida.

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