An S corporation is subject to the following tax(es). a.Built-in gains tax. b.Alternative minimum tax. c.Corporate...

An S corporation is subject to the following tax(es). a.Built-in gains tax. b.Alternative minimum tax. c.Corporate income tax. d.None of these choices are correct.

Expert Solution

Correct Answer:

Option(a) or Built-in gains tax is correct answer. Built-in gains tax is a tax charged on S corporation earlier was charged on C corporation.This tax is charged on appreciated assets of S corporation when it is converted into S corporation and sells it within specific years.The built-in gains tax is payable only when the fair market value of asset is more than adjusted basis of asset.

Incorrect Answers:

Option(b) or Alternative minimum tax is incorrect answer. Alternative minimum tax is excess minimum tax is charged over regular tax.This tax amount is more than regular tax amount.But Built-in gains tax is a tax charged on S corporation.

Option(c) or Corporate income tax is incorrect answer because this tax is directly charged on income or profit of the corporations.It is also known as Corporation tax or Company tax. But built-in gains tax is charged on S corporation.

So Correct answer is option (a) or Built-in gains tax

ekkarill92 answered 2 years ago

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