At the Beginning of the Year, Clampett, Inc

question 103

Multiple Choice

At the beginning of the year, Clampett, Inc., had $100,000 in its AAA and $60,000 of earnings and profits from prior C corporation years.During the year, Clampett, Inc., earned $50,000 of ordinary income and paid $200,000 in distributions to its shareholders.Assume that J.D.owns 25 percent of Clampett, Inc., his basis in Clampett, Inc., at the beginning of the year is $10,000, and his share of the distribution was $50,000.How much, if any, of the distribution is taxable as a capital gain?

• A)$0.
• B)$15,000.
• C)$27,500.
• D)$40,000.
• E)None of the choices are correct.