Choice "b" is correct. The built-in gain for the machine is $10,000, the difference, on the date of the election of S status, between the $20,000 adjusted basis of the machine to the C corporation and the $30,000 fair market value. That is the amount of the gain that occurred while the corporation was a C corporation, and it is also the amount that is subject to the built-in gains tax.

Choice "a" is incorrect. The $0 indicates that there is no built-in gain on the machine. There are a number of exceptions to the built-in gains tax, but none of them apply in this question.

Choice "c" is incorrect. The $5,000 is the amount of the gain recognized on the sale ($35,000 - $20,000 - $10,000) that is not built-in gain. The $5,000 gain occurred while the corporation was an S corporation and is not subject to the built-in gains tax.

Choice "d" is incorrect. The $15,000 is the total gain recognized on the sale ($35,000 - $20,000), not the amount of gain subject to the built-in gains tax.