September 2023 Critical Thinking S Corporation Lockhart Corporation is a calendar year corporation At the beginning of 2013 its election to be taxed
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Critical Thinking S Corporation Lockhart Corporation is a calendar year corporation At the beginning of 2013 its election to be taxed 2023
Critical Thinking: S-Corporation 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). 1. During 2013, Lockhart sold the entire 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. 2. 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. 3. 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? Be sure to show your work.