Worthy Corporation Elected to Be Taxed as an S Corporation

question 64

Multiple Choice

Worthy Corporation elected to be taxed as an S corporation on January 1,of last year,effective last year.It had previously been a C corporation.On the effective date of the S election,Worthy had land with a $70,000 basis and a $210,000 FMV.No net unrealized losses exist on the date of the S corporation election.The land is sold this year for $250,000.The tax result of the sale by Worthy is

• A)no gain or loss recognized.
• B)a gain of $180,000,none of which is subject to the built-in gains tax.
• C)a gain of $180,000,all of which is subject to the built-in gains tax.
• D)a gain of $140,000 subject to the built-in gains tax and passes though to shareholders,plus a $40,000 gain subject to on the regular S-corporation pass-through rules.

---

Definitions:

Protestant Revolution

Refers to the period of religious reform in the 16th century that led to the creation of Protestant Christianity, breaking away from the Roman Catholic Church.

European Monarchs

The kings, queens, emperors, or empresses reigning over countries in Europe, playing various roles from figureheads to absolute rulers depending on the country's system of governance.

16th Century

The period from 1501 to 1600, marked by significant events such as the beginning of the Reformation and the exploration and colonization of the Americas.

Americas

The lands of the Western hemisphere, comprising North, Central, and South America.