During 2016, MVC Operated as a C Corporation

question 6

Essay

During 2016, MVC operated as a C corporation. However, it made an election to be taxed as an S corporation effective January 1, 2017. MVC uses the accrual method of accounting and uses the LIFO method of accounting for its inventory. At the end of 2016 its inventory basis under the LIFO method was $63,000. If MVC had used the FIFO method of accounting for its inventory, it would had a $70,000 basis in its inventory. Finally, MVC's regular taxable income in 2016 was $80,000. What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

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Definitions:

Constitution

The fundamental law or set of principles by which a nation or state is governed, outlining the powers and duties of the government and the rights of the citizens.

Unitary Government

A system of political organization in which most or all of the governing power resides in a centralized government.

Written Constitution

A formal document that defines the structure of a government, the rights of the citizens, and the powers of the authorities; distinct from unwritten or customary constitutions.

United Kingdom

A sovereign country located off the northwestern coast of mainland Europe, comprising England, Scotland, Wales, and Northern Ireland.