Assume that at the end of 2018, Clampett, Inc. (an S corporation) distributes long-term capital gain property (fair market value of $40,000, basis of $25,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Inc. has no corporate E&P and J. D. has a basis of $15,000 in his Clampett, Inc. stock. How much income does J. D. recognize as a result of the distribution?

Question

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$15,000 distributive share of the gain on the distribution ($40,000 − $25,000) plus $10,000 due to the $40,000 distribution exceeding J. D.'s $30,000 basis ($15,000 original basis + $15,000 increase in basis from gain from property distribution).

Assume That at the End of 2018, Clampett, Inc