Rodeo, Inc., a cash basis S corporation in College Station, Texas, formerly was a C corporation. Rodeo records the following assets and liabilities on January 1, 2012, the date its S election is made.
|
Adjusted Basis |
Fair Market |
|
|
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 2012, Rodeo collects the accounts receivable and pays the accounts payable. The land is sold for $3 million, and taxable income for the year is $590,000. What is Rodeo’s built in gains tax?