Question

Clampett, Inc. has been an S corporation since its inception. On July 15, 2019, Clampett, Inc. distributed $50,000 to J. D. His basis in his Clampett, Inc. stock on January 1, 2019, was $45,000. For 2019, J. D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is J.D.'s basis in his Clampett, Inc. stock after all transactions in 2019?

a. $20,000.
b. $40,000.
c. $5,000.
d. $30,000.
e. None of the choices are correct.

Answer 1

J.D.'s basis in his Clampett, Inc. stock after all transactions in 2019 is $5,000.

Step-by-step explanation:

J.D.'s basis in his Clampett, Inc. stock after all transactions in 2019 can be calculated as follows:

Starting basis on January 1, 2019: $45,000

Add: Ordinary income allocated to J.D. from Clampett, Inc. in 2019: $10,000

Subtract: Distribution received by J.D. from Clampett, Inc. in 2019: $50,000

J.D.'s basis in his Clampett, Inc. stock after all transactions in 2019 is therefore:

$45,000 + $10,000 - $50,000 = $5,000

Therefore, the correct answer is c. $5,000.