During 2020, MVC Operated as a C Corporation

question 2

Essay

During 2020, MVC operated as a C corporation. However, it made an election to be taxed as an S corporation effective January 1, 2021. MVC uses the accrual method of accounting and uses the LIFOmethod of accounting for its inventory. At the end of 2020 its inventory basis under the LIFO method was $80,000. If MVC had used the FIFOmethod of accounting for its inventory, it would have had a $100,000 basis in its inventory. Finally, MVC's regular taxable income in 2020 was $5,000. What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

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Definitions:

Situational Constraints

External factors that limit or influence an individual's ability to perform a task or achieve a goal.

Personality Traits

Enduring patterns of thought, feeling, and behavior that characterize an individual across different situations and over time.

External Influences

Factors originating outside an individual that significantly affect their behaviors, decisions, and attitudes.

Implicit

Something implied or understood though not directly expressed.