On the effective date of the Bravo Corporation's (the Company) S Corporation election (January 1, 2020) the Company had a built in gain with respect to certain real estate held by the Corporation on that date of $100,000. The Company had zero basis in the real estate and it was appraised for $100,000. One year later (January 1, 2021) this built in gain was realized when the Company sold the real estate to an unrelated party $100,000 and there were no expenses associated with the sale. For the Company's calendar year 2021, the Company has, exclusive of this gain, taxable income of $2,000,000. Required: 1. Calculate the built-in gains tax (Federal) that will be paid by Bravo Corporation with its 2021 tax return as a result of the sale of this real estate. 2. Calculate the amount of gain that will be passed through to the Company's shareholders related to this sale.

On the effective date of the Bravo Corporation's (the Company) S Corporation election (January 1, 2020) the Company had a built in gain with respect to certain real estate held by the Corporation on that date of $100,000. The Company had zero basis in the real estate and it was appraised for $100,000. One year later (January 1, 2021) this built in gain was realized when the Company sold the real estate to an unrelated party $100,000 and there were no expenses associated with the sale. For the Company's calendar year 2021, the Company has, exclusive of this gain, taxable income of $2,000,000. Required: 1. Calculate the built-in gains tax (Federal) that will be paid by Bravo Corporation with its 2021 tax return as a result of the sale of this real estate. 2. Calculate the amount of gain that will be passed through to the Company's shareholders related to this sale.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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