Question

Clampett, Inc. has been an S corporation since its inception. On July 15, 2019, Clampett, Inc. distributed $40,500 to J. D. His basis in his Clampett, Inc. stock on January 1, 2019, was $35,000. For 2019, J. D. was allocated $12,000 of ordinary income from Clampett, Inc. and no separately stated items. How much capital gain does J. D. recognize related to Clampett, Inc. in 2019?a. $40,500.b. $12,000.c. None of the choices are correct.d. $52,500.e. $24,000.

Answer 1

c. None of the choices are correct

Step-by-step explanation:

Calculation of capital gain

Basis of stock $35,000

Allocated ordinary income $12,000

Total basis $47,000

Amount distributed $40,500

Therefore, Since basis is more than distribution capital gain, The capital gain is $0.