MWC Is a C Corporation That Uses the Accrual Method

question 44

Essay

MWC is a C corporation that uses the accrual method of accounting.MWC made an S election, effective January 1 of 2019.The following assets were owned by MWC on December 31, 2018.
$\begin{array}{lccc} &\text { Fair Market } & \\& \text { Value } & \text { Adjusted } \\ \quad\quad\quad\quad\quad\text { Asset } & \text { (FMV) } & \text { basis (AB) } \\\text { Cash } & \$ 40,000 & \$ 40,000 \\\text { Accounts receivable } & 15,000 & 15,000 \\\text { Inventory (FIFO) } & 20,000 & 25,000 \\\text { Land } & \underline{ 125,000 }& \underline{100,000} \\\text { Total } & \$ 200,000 & \$ 180,000 \\\hline\end{array}$
What is MWC's net unrealized built-in gain when it converts to an S corporation on January 1, 2019?

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Definitions:

Convertible Securities

Bonds or preferred stock issues that are convertible into a set number of shares of the issuing company’s common stock.

Convertible Securities

Financial instruments, such as bonds or preferred shares, that can be converted into another type of security, typically shares of the issuing company's stock.

Daily Trading

The practice of buying and selling financial instruments within the same trading day, aiming to exploit short-term market movements.