During 2018, MVC Operated as a C Corporation

question 115

Essay

During 2018, MVC operated as a C corporation. However, it made an election to be taxed as an S corporation effective January 1, 2019. MVC uses the accrual method of accounting and uses the LIFO method of accounting for its inventory. At the end of 2018 its inventory basis under the LIFO method was $80,000. If MVC had used the FIFO method of accounting for its inventory, it would have had a $100,000 basis in its inventory. Finally, MVC's regular taxable income in 2018 was $5,000. What amount of LIFO recapture tax must MVC pay? When must it pay the tax?

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Definitions:

Tariff

A tax on imported goods.

Shifts

refers to movements or changes in economic indicators, demand/supply curves, or other economic paradigms, often due to external factors.

Economies of Scale

The cost advantages that enterprises obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Selling Below Cost

The practice of offering goods or services for sale at a price that is less than the total cost to produce and sell them.