Question

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.

Answer 1

An S corporation is subject to the built-in gains tax if certain conditions are met but does not pay the alternative minimum tax or corporate income tax, as its income is passed through to the shareholders' individual tax returns.

Step-by-step explanation:

An S corporation is subject to certain types of taxation but is generally known for its pass-through taxation features, where the income, losses, deductions, and credits flow through the shareholders to be reported on their individual returns. However, there are specific taxes that an S corporation may be responsible for:

• Built-in gains tax: This tax may apply if the corporation was previously a C corporation and had appreciated assets at the time of the S election.
• Alternative minimum tax (AMT): AMT does not apply to S corporations directly after the Tax Cuts and Jobs Act of 2017.
• Corporate income tax: Generally, the S corporation itself does not pay income tax. Instead, the shareholders pay tax on their proportionate shares of the S corporation's income.

Based on these facts, an S corporation is subject to the built-in gains tax if certain criteria are met, but not the alternative minimum tax or the typical corporate income tax.