If a C-Corp acquired a machine for $100,000 8/15/2005. Then elected to become an S Corp in 2009. We sold the machine on 2/13/2010 for $40,000, which is payable to us in four annual installments plus interest. What amount of ordinary income will we report on the sale?

" We sold the machine on 2/13/2010 for $40,000, which is payable to us in four annual installments plus interest. What amount of ordinary income will we report on the sale? "---->As you know,the built-in gain tax is computed by applying the highest corporate tax rate (currently 35%) to the net recognized built-in gain realized during the ten-year recognition period.As your S-corp sold the machine before or during the recognition period and reported the income, gain, under the installment method during or after that time, the built-in gain tax generally applies.The amount of your recognized gain is FMV, $40,000- Adjusted basis of the machine, I mean the book value of the machine when it was tranferred to S.corp.Generally, the ordinary income and depreciation recapture income elements of an installment sale must be recognized in the year of the sale regardless of whether payments were received.