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:

Arousal

A state of heightened physiological and psychological activity, including increased heart rate, alertness, and readiness to respond.

Amniocentesis

The process of identifying genetic defects by examining a small sample of fetal cells drawn by a needle inserted into the amniotic fluid surrounding the unborn fetus.

Chorionic Villus Sampling

Chorionic villus sampling is a prenatal test that involves taking a sample of cells from the placenta to test for chromosomal abnormalities and certain genetic problems.

Karyotype

A complete picture of an individual's chromosomes, arranged in pairs and ordered by size, used to identify chromosomal abnormalities.