​This Year,Sammy Joseph,the Sole Shareholder of a Calendar Year S

question 135

Multiple Choice

​This year,Sammy Joseph,the sole shareholder of a calendar year S corporation,received a distribution of $17,000.On December 31 of the prior year,his stock basis was $3,000.The corporation earned $12,000 ordinary income during the year.It has no accumulated E&P.Which statement is correct?

• A)​Joseph recognizes a $2,000 LTCG.
• B)​Joseph's stock basis will be $2,000.
• C)​Joseph's ordinary income is $15,000.
• D)​Joseph's return of capital is $11,000.

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Definitions:

Vehicle

A means of transportation, typically used to refer to cars, trucks, motorcycles, and other road vehicles.

Comprehensive Component Monitor

A system in vehicular onboard diagnostics that checks the operational status of various components and subsystems to ensure they are working correctly and meet emissions standards.

Diagnostic Test

A systematic examination to determine the cause of a malfunction or disease in vehicles, computers, or biological entities.

ECM

Electronic Control Module, a term often used in automotive engineering referring to a computer that controls one or more electrical systems or subsystems in a vehicle.