During 2016, MVC Operated as a C Corporation

question 119

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 $80,000. If MVC had used the FIFO method of accounting for its inventory, it would had a $100,000 basis in its inventory. Finally, MVC's regular taxable income in 2016 was $5,000. What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

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Definitions:

Basic Assumption

An underlying, fundamental premise or belief that is accepted as true without proof.

Tender Can Be Made

Indicates that an offer or presentation of payment or performance in accordance with the terms of a contract is possible or has occurred.

Day Or Night

A term used to indicate that an action or operation can occur at any time within a 24-hour period.

Revocation Of Acceptance

Undoing the acceptance of an offer or contract, often due to the discovery of a significant problem or defect.