SEC Corporation Has Been Operating as a C Corporation Since

question 79

Essay

SEC Corporation has been operating as a C corporation since 2016.It elected to become an S corporation, effective January 1, 2019.On December 31, 2018, SEC reported a net unrealized built-in gain of $60,000.In addition to other transactions in 2019, SEC sold inventory it owned at the beginning of 2019 (it did not sell any other assets it owned at the beginning of 2019).At the beginning of the year, the inventory it sold had a fair market value of $30,000 and a FIFO tax basis of $10,000.SEC sold the inventory for $35,000.If SEC had been a C corporation in 2019, its taxable income would have been $100,000.How much built-in gains tax must SEC pay in 2019?

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Definitions:

Hepatic Portal System

The portion of the circulatory system that carries blood from the intestine through the liver.

Blood Circulation

The continuous movement of blood through the heart and blood vessels, which delivers nutrients and oxygen to all cells and carries away waste products.

Nucleic Acids

Complex organic substances that constitute the genetic material of living cells, including DNA and RNA.

Phosphorus

A chemical element with the symbol P and atomic number 15, essential for life, involved in various biological processes, including energy transfer and the formation of bones and teeth.