Clampett, Inc

Multiple Choice

Clampett, Inc. converted to an S corporation on January 1, 2018. At that time, Clampett, Inc. had cash ($40,000) , inventory (FMV $60,000, Basis $30,000) , accounts receivable (FMV $40,000, Basis $40,000) , and equipment (FMV $60,000, Basis $80,000) . In 2019, Clampett, Inc. sells its entire inventory for $60,000 (Basis $30,000) . Assume the corporate tax rate is 21% and that Clampett Inc.'s taxable income would have been a $50,000 loss in 2019 if it had been a C corporation. In 2020, Clampett, Inc.'s taxable income would have been $100,000 if it had been a C corporation. How much built-in gains tax does Clampett, Inc. pay in 2019? In 2020?

A) $10,500 in 2019; $0 in 2020.
B) $2,100 in 2019; $0 in 2020.
C) $0 in 2019; $0 in 2020.
D) $0 in 2019; $10,500 in 2020.
E) None of the choices are correct.