Lent Corporation converts to S corporation status for this year.Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000).How much tax must be added to the C corporation tax liability for the year before the S election,assuming that Lent is subject to a 35% tax rate.

Question

​Lent Corporation converts to S corporation status for this year.Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000).How much tax must be added to the C corporation tax liability for the year before the S election,assuming that Lent is subject to a 35% tax rate.

Quizplus · Accepted Answer

The LIFO reserve is $140,000 ($650,000 - $510,000). The tax on this amount is $49,000 ($140,000 x 35%).

​Lent Corporation Converts to S Corporation Status for This Year

Lent Corporation Converts to S Corporation Status for This Year