Whindy Corporation, an S corporation, reports a recognized built-in gain of $80,000 and a recognized built-in loss of $10,000 this year. Whindy holds an $8,000 unexpired NOL carryforward from a C corporation year. Whindy's ordinary income for the year is $65,000. Assume a corporate tax rate of 21%. Calculate any built-in gains tax.

Question

Dane

Business

1 February, 13:45

Whindy Corporation, an S corporation, reports a recognized built-in gain of $80,000 and a recognized built-in loss of $10,000 this year. Whindy holds an $8,000 unexpired NOL carryforward from a C corporation year. Whindy's ordinary income for the year is $65,000. Assume a corporate tax rate of 21%. Calculate any built-in gains tax.

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Magdalena Collier · Answer 1

Built-in gains tax is $13,020.

Explanation:

The built-in gains tax is one levied against an S corporation that used to be a C corporation, or received assets from a C corporation.

Here,

Gain = $80,000

Loss = $10,000

Holds = $8,000

Income = $65,000

Corporate tax = 21%

To calculate the built-in gains tax, we will need to calculate the net gain of the corporation and multiply it by the tax rate.

= Built-in-gain - built-in-loss - unexpired NOL

80,000 - 10,000 - 8,000 = 62,000

Then

62,000 x 0.21 tax rate = 13,020

= 13,020