Question

T/F The built-in gains tax does not apply to S corporations that never operated as C corporations.

Answer 1

The built-in gains tax applies to S corporations that were previously operating as C corporations.

Step-by-step explanation:

The statement is True. The built-in gains tax is a tax applied to S corporations that were previously operating as C corporations. When a C corporation converts to an S corporation, it is subject to the built-in gains tax if it has appreciated assets that were acquired before the conversion. This tax is meant to prevent corporations from converting to S corporations to avoid paying taxes on the built-in gains of their appreciated assets.