Tempe Corporation is a calendar-year corporation. At the beginning of 2014, its election to be taxed as an S corporation became effective. Tempe Corp.'s balance sheet at the end of 2013 reflected the following assets (it did not have any earnings and profits from its prior years as a C corporation):
Asset ____________________Adjusted basis _____________FMV
Cash ................................... $20,000 ..................... $20,000
Accounts receivable .................. 40,000 ....................... 40,000
Inventory ............................ 160,000 ..................... 200,000
Land ................................. 150,000 ..................... 120,000
Totals .............................. $370,000 ..................... $380,000
Tempe's business income for the year was $40,000 (this would have been its taxable income if it were a C corporation).
a. During 2014, Tempe sold all of the inventory it owned at the beginning of the year for $210,000. What is its built-in gains tax in 2014?
b. Assume the same facts as in (a) except that if Tempe were a C corporation, its taxable income would have been $7,000. What is its built-in gains tax in 2014?
c. Assume the original facts except the land was valued at $140,000 instead of $120,000. What is Tempe's built-in gains tax in 2014?