Choice c is incorrect the taxpayer may elect to use

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Unformatted text preview: the corporate level; however, in this case, there was built-in gain of $45,000 upon the election to become an S corporation, so the related C corporation tax must be paid upon the sale of the asset. Choice "a" is incorrect. The gain to the corporation is a total of $55,000 ($95,000 - $40,000). An S corporation generally does not pay tax at the corporate level; however, in this case, there was built-in gain of $45,000 upon the election to become an S corporation, so the related C corporation tax must be paid upon the sale of the asset. Choice "b" is incorrect. This choice option incorrectly assumes that the tax is calculated as 35% of the difference between the sales price of the asset ($95,000) and the fair market value at the effective date of the S election ($85,000). [$95,000 - $85,000 = $10,000; $10,000 * 35% = $3,500] 46 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Maxixishere Pdf Collection Becker CPA Review, PassMaster Questions Lecture: Regulation 3 Choice "d" is incorrect. This choice option incorrectly uses the actual total gain on the sale (the sales price of $95,000 less the basis of $40,000) and then calculates the ta...
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.

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