Question

Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $42,500 to J.D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $36,000. For 2021, J.D. was allocated $11,800 of ordinary income from Clampett, Incorporated, and no separately stated items. How much capital gain does J.D. recognize related to Clampett, Incorporated, in 2021

Answer 1

Answer:

See bellw

Explanation:

Income of J.D related to Clampett = Ordinary income + Capital gain

Given that

Basis distribution = $42,500

Basis stock = $36,000

Ordinary = $11,800

But Capital gain = Basis distribution - (Basis stock + Ordinary income

= $42,500 - ($36,000 + $11,800)

= $42,500 - $47,800

= - $5,300

Therefore, J.D income related to Clampett

= Ordinary income + Capital gain

= $11,800 - $5,300

= $6,500