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

question 55

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's taxable income would have been a $50,000 loss in 2021 if it had been a C corporation. In 2022, Clampett, Incorporated's taxable income would have been $100,000 if it had been a C corporation. How much built-in gains tax does Clampett, Incorporated, pay in 2021? In 2022?

• A)$10,500 in 2021; $0 in 2022
• B)$2,100 in 2021; $0 in 2022
• C)$0 in 2021; $0 in 2022
• D)$0 in 2021; $10,500 in 2022
• E)None of the choices are correct.

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