Apple, Inc. a cash basis S corporation in Orange, Texas, formerly was a C corporation. Apple has
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Question:
Apple, Inc. a cash basis S corporation in Orange, Texas, formerly was a C corporation. Apple has the following assets and liabilities on January 1, 2010, the date the S election is made:
| | 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 |
During 2010, Apple collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and taxable income for the year is $590,000. What is Apple's built-in gains tax?
A. $0
B. $206,500
C. $590,000
D. $695,000
E. None of the above
Expert Answer:
B 206500 The net unrealized builtin gain on the conversion date is 685000 105000 ... View the full answer
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