Accounting
Basil, Inc, a “C” corporation makes an “S” election which is effective beginning January 1, 2018. Basil is a calendar year entity reporting as an accrual basis taxpayer. On January 1, 2018, Basil had the following property:
Asset Fair Market Value Adjusted Tax Basis Built-In Gain
Cash $200,000 $200,000 $0
Unrealized Receivables $115,000 $0 $0*
Real Property #1 $230,000 $100,000 $130,000
Real Property #2 $520,000 $350,000 $170,000
Total $1,065,000 $650,000 $300,000
*This is an accrual basis taxpayer so the revenue from the unrealized receivables was recognized when the business was a “C” corporation
Calculate the Built-In Gains Tax assuming the tax rate is 21%
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