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 $30,000. For 2019, J. D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. What is the amount of income J. D. recognizes related to Clampett, Inc. in 2019?

Answer 1

$20,000

Step-by-step explanation:

Distribution basis = $50,000

Stock basis = $30,000

Ordinary income = $10,000

To compute capital gain tax,

Capital gain = Distribution basis -Stock basis - Ordinary income

= $50,000 - $30,000 - $10,000

= $10,000

To compute J.D income related to Clampett;

= Ordinary income + Capital gain

= $10,000 + $10,000

= $20,000