Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $50,000 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $45,000. For 2021, J.D. was allocated $10,000 of ordinary income from Clampett, Incorporated, and no separately stated items. What is the total amount of income J.D. recognizes related to Clampett, Incorporated, in 2021?

Question

Quizplus · Accepted Answer

J.D. recognizes $10,000 of ordinary income allocated to him from Clampett, Incorporated. The distribution of $50,000 is not taxable to the extent of his stock basis, which is $55,000 after adding the $10,000 income to his initial basis of $45,000. Thus, the distribution does not result in additional income recognition.

Clampett, Incorporated, Has Been an S Corporation Since Its Inception