During 2019, MVC Operated as a C Corporation

question 128

Essay

During 2019, MVC operated as a C corporation.However, it made an election to be taxed as an S corporation effective January 1, 2020.MVC uses the accrual method of accounting and uses the LIFO method of accounting for its inventory.At the end of 2019 its inventory basis under the LIFO method was $63,000.If MVC had used the FIFO method of accounting for its inventory, it would have had a $70,000 basis in its inventory.Finally, MVC's regular taxable income in 2019 was $80,000.What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

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Definitions:

Fines

Penalties of monetary payment imposed by a court on a person or organization as punishment for an offense.

Imprisonment

The act of confining someone in a prison as a punishment for committing a crime.

Accountant-client Privilege

A legal privilege that keeps communications between an accountant and their client confidential, similar to attorney-client privilege.

Common Law

The body of law derived from judicial decisions and customs, as opposed to statutes or written laws enacted by legislative bodies.