Worthy Corporation elected to be taxed as an S corporation on January 1,of last year,effective last year.It had previously been a C corporation.On the effective date of the S election,Worthy had land with a $70,000 basis and a $210,000 FMV.No net unrealized losses exist on the date of the S corporation election.The land is sold this year for $250,000.The tax result of the sale by Worthy is

Question

Quizplus · Accepted Answer

The built-in gains tax applies to the $140,000 of gain that accrued while Worthy was a C corporation. The remaining $40,000 of gain is subject to the regular S corporation pass-through rules.

Worthy Corporation Elected to Be Taxed as an S Corporation