Virginia Corporation is a calendar-year corporation. At the beginning of 2019, its election to be taxed as an S corporation became effective. Virginia Corp.’s balance sheet at the end of 2018 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation).

In 2019, Virginia Corp. reported business income of $50,000 (this would have been its taxable income if it were still a C corporation). What is Virginia’s built-in gains tax in each of the following alternative scenarios?

a. During 2019, Virginia Corp. sold inventory it owned at the beginning of the year for $100,000. The basis of the inventory sold was $55,000.

b. Assume the same facts as part (a), except Virginia Corp. had a net operating loss carryover of $24,000 from its time as a C corporation.

c. Assume the same facts as part (a), except that if Virginia Corp. were a C corporation, its taxable income would have been $1,500.

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Asset Adjusted Basis FMV Cash $ 20,000 $ 20,000 Accounts 40,000 40,000 receivable Inventory 90,000 200,000 Land 150,000 175,000 Totals $300,000 $435,000