Question

Lent Corporation converts to S corporation status in 2018. Lent had been using the LIFO inventory method and held a LIFO inventory value of $510,000 (FIFO value of $650,000). How much tax must be added to the C corporation tax liability for the year before the S election in 2019?

Answer 1

Answer:

The tax that must be added to the C corporation tax liability for the year before the S election = $49000*1/4=$12250

The rest of the three instalments of $12250 each will be paid with Lent Corporation's next three tax returns

Explanation:

FIFO Value/basis =$650000

LIFO value/basis =$510000

Difference =$140000

35% Tax =$140000*35% = $49000

The tax that must be added to the C corporation tax liability for the year before the S election = $49000*1/4=$12250

The rest of the three instalments of $12250 each will be paid with Lent Corporation's next three tax returns