Alomar, a cash basis S corporation in Orlando, Florida, holds the following asse

Question

Alomar, a cash basis S corporation in Orlando, Florida, holds the following assets and liabilities on January 1, 2015, the date the S election is made:

During 2015, Alomar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $900,000. Calculate any built-in gains tax.

Adjusted Basis Fair Market Value Cash $200,000 $200,000 Accounts receivable 0 105,000 Equipment 110,000 100,000 Land 1,800,000 2,500,000 Accounts Payable 0 110,000

Explanation / Answer

Alomar   Built in Gain Calculation Amt $ Accounts Receivable                  105,000 Accounts Payable             (110,000) Equipment                (10,000) Land (Limited to built in gain)                700,000 Net Unrealized Built in Gain                  685,000 Taxable Income =                900,000 Built in Tax is calculated on smaller amount of $658000 Assuming 34% marginal Tax Built in Gains Tax = $           232,900

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