B Corporation Elected to Convert from C Status to S

question 42

Multiple Choice

B Corporation elected to convert from C status to S status.B uses the accrual basis.At the time the election takes effect, the records show: $\begin{array} { l }\text { Basis }&FMV&\text { Gain/Loss }\\\text { Inventory }&\$30,000&\$70,000&\$40,000\\\text { Land/Building }&150,000&750,000&600,000\\\text { Trucks }&25,000&15,000&(10,000) \\\text { Total }&\$205,000&\$835,000&\$630,000\end{array}$
In the first taxable year after B became an S corporation, it sold the inventory held by the C corporation for $70,000 and the truck fleet acquired in the C corporation years for $15,000.In the first taxable year as an S corporation, there was no dividend income, and B's taxable income was determined as if it were a C corporation is $50,000.From the C corporation operations, there is NOL carryover of $5,000.For the first taxable year, the top corporate tax rate is 35 percent.B's built-in gains tax for the first taxable year as an S corporation is

• A)$15,300
• B)$8,750
• C)$10,500
• D)$17,000