At the Beginning of the Year, Clampett, Inc

question 46

Multiple Choice

At the beginning of the year, Clampett, Inc. had $100,000 in its AAA, $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% of Clampett, Inc., his basis in Clampett, Inc. at thebeginning 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) $27,500.
• C) $15,000.
• D) $40,000.
• E) None of the choices are correct.

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Definitions:

Preoperational

A stage in Jean Piaget's theory of cognitive development where children from about 2 to 7 years old engage in symbolic play but struggle with logic and taking the perspective of others.

Concrete Operations

A stage in Jean Piaget's theory of cognitive development, typically occurring between ages 7 and 11, when children gain the ability to think logically about concrete events.

Decenter

The cognitive ability to take multiple aspects of a situation into account and understand perspectives other than one's own.

Transformations

Changes or alterations in form, appearance, or nature that can occur in different contexts, such as mathematics, linguistics, or biology.