From my reading of the NFA if you rifled a Short Pistol gripped 12 quage it would be legal as the NFA defines a Shotgun as having a Smooth bore. As evidence of this the MAgnum Research's BFR that fires a 410 shotgun cartridge. Am I wrong? Looking for opinions if it is legal can't a pistol in 12 guage be built (not readily converted to a standard shotgun) that can mount below an AR? If I am wrong why?

Nope. This has been discussed here before, but it was quite a while ago. The verdict was that it would be considered at the very least, a Destructive Device.
I wanted to rifle the barrel of an 18.5" Mossberg 500, so I could shorten it to 16" since it would be a rifle then I thought. I planned to make it a dedicated slug gun. Because of the bore being over .50 in diameter, It can't be a rifle or a pistol legally and must stay at 18"+ unless legally made into an AOW or a SBS.

[url]http://www.flashdistributor.com[/url]

Rifles have a similar exception for sporting purposes. It is in there, look for it. I doubt though that the ATF would let you use it for anything other than a factory built Slug Gun.

You can try a 410 as they are below .5". A 12 Gauge is .75". I believe a 20 Gauge is .6" For example, If not for the 1994 AW Ban, we could make USAS, Street Sweepers, etc...in 410 Gauge. I personally consider 410 kinda small, but it isn't relegated to sporting purposes.

I have seen alot of 410 Pistols. All have Rifled Bores. I saw a Specialized 12 Gauge Pistol that somehow does not qualify as a firearm. Flash Distributing is kinda weird in that they sell alot of guns you'd think were either illegal or require an FFL. They somehow alter them so that they are legal. The 12 Gauge Pistol uses special ammo. which I am willing to bet the powder doesn't "yield readily to combustion." Rapid Gas Expansion ?

They also have Full-Automatic M-16s for $99. They also do not qualify as Firearms. Strange, but again special ammo. At close range it is supposed to knock the person senseless, but not kill.

the 12 gauge that flash distro sells is a flare gun also they have what is essentaly a pepper spray round. the m16 they sell is a airsoft iin other words a bb gu. they say 25 cal but its really a 6mm plastic bb. as far are the BFR it has a rifled barrel and its under the destactive devive bore. in order to be a smoothbore pistol it would be a AOW. kinda like the Auto and Burgular 12 gauge pistol. yes u heatrd me rigth a 12 guage pistol. becosue it never had a buttstock and its a smooth bore pistol it is considered a  AOW with transfers on a 5 tax stamp. a shotgun mounted on a ar is considered a Short barreled shotgun ATF considers the buttstock on the ar15 to also be the butstock on the shotgun.