Question

Altimar, a cash basis S corporation in Sweetwater, Florida, holds the following assets and liabilities on January 1, 2017, 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 the year, Altimar collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and the taxable income for the year is $590,000. Calculate any built-in gains tax. Show your calculations.

Answer 1

The tax is applicable on lower of
Taxable income or net unrealized built in gain
Taxable Income	$590,000
Net unrealized Built in Gain
Accounts receivable	$105,000
Less: accounts payable	-110000
Gain on sale of land (2500000-1800000)	$700,000
Total	$695,000
which is limited to maximum amt sub to section 1374 taxes	$685,000
hence buildt in gain tax will be
$590000*35%	$206500	ans
Ans the remaining (6850000-590000) will be carried forward to next year and will be treated as recognized built in gain

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