During 2010,an S corporation in Flint,Michigan,has a recognized built-in gain of $81,200 and a recognized built-in loss of $10,000.It also holds an unexpired NOL from a C corporation year of $9,000,and it generates taxable income of $66,000.The built-in gain tax is,if any:

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The S corporation has a recognized built-in gain of $81,200 and a recognized built-in loss of $10,000. The net recognized built-in gain for the year is $71,200 ($81,200 - $10,000).

Since the S corporation is within its 5-year recognition period, it is subject to the built-in gains tax. The built-in gains tax rate for 2010 is 35%.

The amount of built-in gains tax owed is calculated as follows:

Net recognized built-in gain x built-in gains tax rate = Built-in gains tax

$71,200 x 35% = $24,920

However, the S corporation also has an unexpired NOL from a C corporation year of $9,000. This NOL can be used to offset taxable income in the current year.

Taxable income - NOL = Adjusted taxable income

$66,000 - $9,000 = $57,000

The built-in gains tax owed cannot exceed the lesser of the built-in gains tax or 10 times the excess of the adjusted taxable income over the NOL.

10 x ($57,000 - $9,000) = $480,000

The built-in gains tax owed is $19,950 ($24,920 is less than $480,000). Therefore, the answer is B) $19,950.

During 2010,an S Corporation in Flint,Michigan,has a Recognized Built-In Gain