At the Beginning of the Year, Clampett, Inc

question 79

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 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.