This year,Sammy Joseph,the sole shareholder of a calendar year S corporation,received a distribution of $17,000.On December 31 of the prior year,his stock basis was $3,000.The corporation earned $12,000 ordinary income during the year.It has no accumulated E&P.Which statement is correct?

Question

​This year,Sammy Joseph,the sole shareholder of a calendar year S corporation,received a distribution of $17,000.On December 31 of the prior year,his stock basis was $3,000.The corporation earned $12,000 ordinary income during the year.It has no accumulated E&P.Which statement is correct?

Quizplus · Accepted Answer

Joseph recognizes a $2,000 LTCG because the distribution exceeds his stock basis plus the corporation's ordinary income, resulting in a capital gain.

​This Year,Sammy Joseph,the Sole Shareholder of a Calendar Year S

This Year,Sammy Joseph,the Sole Shareholder of a Calendar Year S