Assume That at the End of 2020, Clampett, Incorporated (An

question 137

Multiple Choice

Assume that at the end of 2020, Clampett, Incorporated (an S corporation) distributes property (fair market value of $43,000, basis of $6,000) to each of its four equal shareholders (aggregate distribution of $172,000) . At the time of the distribution, Clampett, Incorporated, has no corporate earnings and profits and J.D. has a basis of $50,400 in his Clampett, Incorporated, stock. How much total income does J.D. recognize as a result of the distribution?

• A)$0
• B)$6,000
• C)$37,000
• D)$43,000
• E)None of the choices are correct.

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Definitions:

Labour Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost of labor for the actual production level.

Labour Efficiency Variance

A measure used in accounting to indicate the difference between the actual number of labor hours used and the standard number of hours that should have been used, multiplied by the standard labor rate.

Variable Overhead

Costs that vary with the level of production or business activity, such as utilities and indirect materials, but do not directly correlate to direct labor or materials.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the expected (or standard) costs, based on efficient usage of resources.