Question

Clampett, Inc., has been an S corporation since its inception. On July 15, 2020, Clampett, Inc., distributed $44,000 to J.D. His basis in his Clampett, Inc., stock on January 1, 2020, was $42,000. For 2020, J.D. was allocated $10,600 of ordinary income from Clampett, Inc., and no separately stated items. How much capital gain does J.D. recognize related to Clampett, Inc., in 2020

Answer 1

Answer:

-$8,600

Explanation:

Data provided in the question:

Distributions = $44,000

Basis = $42,000

Amount of ordinary income allocated = $10,600

Now,

Capital gain from distribution in excess of basis

= Distribution - Basis -  Amount of ordinary income allocated

= $44,000 - $42,000 - $10,600

= -$8,600

here, negative sign depicts there is a capital loss