McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 30

Virginia Corporation is a calendar-year corporation.At the beginning of 2011, its election to be taxed as an S corporation became effective.Virginia Corp.s balance sheet at the end of 2010 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation).
In 2011, Virginia reported business income of $50,000 (this would have been its taxable income if it were still a C corporation).What is Virginia's built-in gains tax in each of the following alternative scenarios?
a.During 2010, Virginia sold inventory it owned at the beginning of the year for $100,000.The basis of the inventory sold was $55,000.b.Assume the same facts as (a), except Virginia had a net operating loss carryover of $24,000 from its time as a C corporation.c.Assume the same facts as (a), except that if Virginia were a C corporation, its taxable income would have been $1,500.