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 35

Tempe Corporation is a calendar-year corporation.At the beginning of 2011, its election to be taxed as an S corporation became effective.Tempe 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):
Tempe's business income for the year was $40,000 (this would have been its taxable income if it were a C corporation).a.During 2011, Tempe sold all of the inventory it owned at the beginning of the year for $210,000.What is its built-in gains tax in 2011?
b.Assume the same facts as in (a), except that if Tempe were a C corporation, its taxable income would have been $7,000.What is its built-in gains tax in 2011?
c.Assume the original facts except the land was valued at $140,000 instead of $120,000.What is Tempe's built-in gains tax in 2011?