Clampett, Inc. has been an S corporation since its inception. On July 15, 2017, Clampett, Inc. distributed $50,000 to J. D. His basis in his Clampett, Inc. stock on January 1, 2017, was $30,000. For 2017, J. D. was allocated $10,000 of ordinary income from Clampett, Inc. and no separately stated items. How much capital gain does J. D. recognize related to Clampett, Inc. in 2017?

Question

Quizplus · Accepted Answer

J. D.'s basis in the stock is increased by the $10,000 of ordinary income, making it $40,000. The distribution of $50,000 exceeds this basis by $10,000, which is recognized as a capital gain.