Mock Corporation converts to S corporation status in 2020. Mock used the LIFO inventory method in 2019 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election. How much tax must be added to Mock's 2019 corporate tax liability, assuming that Mock is subject to a 21% tax rate.
A) $-0-
B) $6,038
C) $24,150
D) $115,000

Question

Quizplus · Accepted Answer

The LIFO reserve is $115,000 ($550,000 - $435,000). The tax on the LIFO reserve is $24,150 ($115,000 x 21%).

Mock Corporation Converts to S Corporation Status in 2020