Until the end of year 0, Magic Carpets (MC) was a C corporation with a calendar year.

Question:

Until the end of year 0, Magic Carpets (MC) was a C corporation with a calendar year. At the beginning of year 1 it elected to be taxed as an S corporation. MC uses the LIFO method to value its inventory. At the end of year 0, under the LIFO method, its inventory of rugs was valued at $150,000. Under the FIFO method, the rugs would have been valued at $170,000. How much LIFO recapture tax must MC pay, and what is the due date of the first payment under the following alternative scenarios?
a. Magic Carpets' regular taxable income in year 0 was $65,000.
b. Magic Carpets' regular taxable income in year 0 was $200,000.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Taxation Of Individuals And Business Entities 2015

ISBN: 9780077862367

6th Edition

Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Question Posted: