A cash basis calendar year C corporation reports $100,000 of accounts receivable on the date of its conversion to an S corporation on February 14.By the end of the year, $60,000 of these receivables are collected.Calculate any built-in gains tax, assuming that there is sufficient taxable income.

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Quizplus · Accepted Answer

The built-in gains tax is calculated as the difference between the fair market value of the accounts receivable and their adjusted basis. The fair market value of the accounts receivable is $60,000, and the adjusted basis is $0. Therefore, the built-in gains tax is $60,000.

A Cash Basis Calendar Year C Corporation Reports $100,000 of Accounts