Clampett, Inc., has been an S corporation since its inception.On July 15, 2020, Clampett, Inc., distributed $50,000 to J.D.His basis in his Clampett, Inc., stock on January 1, 2020, was $30,000.For 2020, 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 2020?

Question

Quizplus · Accepted Answer

J.D.'s basis in his stock was $30,000, and he received a $50,000 distribution during the year. The amount of the distribution in excess of J.D.'s basis is taxable as a capital gain. In this case, J.D. must recognize $20,000 ($50,000 - $30,000) of capital gain on the distribution. The $10,000 of ordinary income allocated to J.D. has no impact on the amount of gain or loss he must recognize.