Tempe Corporation is a calendar-year corporation. At the beginning of 2022, its election to be taxed as an S corporation became effective. Tempe Corp.’s balance sheet at the end of 2021 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation):

Tempe Corp.’s business income for the year was $40,000 (this would have been its taxable income if it were a C corporation). During 2022, Tempe Corp. sold all of the inventory it owned at the beginning of the year for $210,000.

a) What is its built-in gains tax in 2022?

b) Assume the original facts, except that if Tempe Corp. were a C corporation, its taxable income would have been $7,000. What is its built-in gains tax in 2022?

c) Assume the original facts, except the land was valued at $140,000 instead of $120,000. What is Tempe Corp.’s built-in gains tax in 2022?

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Asset Cash Accounts receivable Inventory Land Totals Adjusted Basis $ 20,000 40,000 160,000 150,000 $370,000 FMV $ 20,000 40,000 200,000 120,000 $380,000