Clampett, Incorporated, Converted to an S Corporation on January 1

question 41

Multiple Choice

Clampett, Incorporated, converted to an S corporation on January 1, 2020. At that time, Clampett, Incorporated, had cash ($40,000) , inventory (FMV $60,000, basis $30,000) , accounts receivable (FMV $40,000, basis $40,000) , and equipment (FMV $60,000, basis $80,000) . In 2021, Clampett, Incorporated, sells its entire inventory for $60,000 (basis $30,000) . Assume the corporate tax rate is 21 percent and that Clampett, Incorporated, had a $20,000 net operating loss carryover from its prior C corporation years. How much built-in gains tax does Clampett, Incorporated, pay in 2021?

• A)$10,500
• B)$10,000
• C)$2,100
• D)$0
• E)None of the choices are correct.

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Definitions:

Prestige Suggestion

A marketing technique where a product or service is associated with high social status or exclusivity to attract customers.

Sales Presentation

A strategic, structured pitch or dialogue designed by a salesperson to highlight a product's or service's benefits and persuade a customer to make a purchase.

Proof Statements

Convincing or persuasive statements used in sales and marketing to validate the benefits or effectiveness of a product or service.

Premium Approach

An approach in which the salesperson offers a prospect something as an inducement to buy.