Until the end of year 0, Magic Carpets (MC) was a C corporation with a...
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Until the end of year 0, Magic Carpets (MC) was a C corporation with a calendar year. At the beginning of year 1 it elected to be taxed as an S corporation. MC uses the LIFO method to value its inventory. At the end of year 0, under the LIFO method, its inventory of rugs was valued at $150,000. Under the FIFO method, the rugs would have been valued at $200,000. How much LIFO recapture tax must MC pay? Magic Carpets regular taxable income in year 0 was $1,000,000.
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