During 2011, Dana Rippel, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2010, her stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

Question

Quizplus · Accepted Answer

Rippel's stock basis increases by the $11,000 of ordinary income, making it $15,000. The $16,000 distribution exceeds her basis by $1,000, which is recognized as a long-term capital gain.

During 2011, Dana Rippel, the Sole Shareholder of a Calendar