Clampett, Inc. has been an S corporation since its inception. On July 15, 2018, Clampett, Inc. distributed $50,000 to J. D. His basis in his Clampett, Inc. stock on January 1, 2018, was $30,000. For 2018, 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. recognizesrelated to Clampett, Inc. in 2018?

Question

Quizplus · Accepted Answer

J. D.'s basis in his Clampett, Inc. stock on July 15, 2018, is $30,000 ($30,000 beginning basis + $0 allocated ordinary income - $0 distributions). Since the distribution of $50,000 exceeds his basis, he must recognize gain on the distribution. The amount of gain recognized is $20,000 ($50,000 distribution - $30,000 basis). J. D.'s ordinary income allocation from Clampett, Inc. is not relevant to the gain recognized on the distribution.