Mock Corporation converts to S corporation status in 2019. Mock used the LIFO inventory method in 2018 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election. How much tax must be added to Mock's 2018 corporate tax liability, assuming that Mock is subject to a 21% tax rate.

Question

Quizplus · Accepted Answer

The LIFO recapture amount is $550,000 - $435,000 = $115,000. The tax on this amount is $115,000 x 21% = $24,150.

Mock Corporation Converts to S Corporation Status in 2019