SEC Corporation Has Been Operating as a C Corporation Since

question 93

Essay

SEC Corporation has been operating as a C corporation since 2013. It elected to become an S corporation, effective January 1, 2016. On December 31, 2015, SEC reported a net unrealized built in gain of $10,000. In addition to other transactions in 2016, SEC sold inventory it owned at the beginning of 2016 (it did not sell any other assets it owned at the beginning of 2016). At the beginning of the year, the inventory it sold had a fair market value of $40,000 and a FIFO tax basis of $15,000. SEC sold the inventory for $28,000. If SEC had been a C corporation in 2016, its taxable income would have been $40,000. How much built-in gains tax must SEC pay in 2016?

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Definitions:

Express Empathy

A fundamental therapeutic skill involving the ability to understand and share the feelings of another, critical in building trust and rapport in clinical settings.

Difficult Patient

Term referring to patients who present significant challenges to healthcare providers, often due to communication barriers, non-compliance with treatment, or emotional and psychological issues.

Follow Up

The act of continuing to stay in touch with someone or keeping track of the progress of a situation after an initial meeting, treatment, or conversation.

Evaluation Form

A document or tool used to assess performance, skills, or knowledge in various contexts, such as in education, employment, or services.