During 2016, Miles Nutt, the Sole Shareholder of a Calendar

question 50

Multiple Choice

During 2016, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. On December 31, 2015, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?

• A)Nutt recognizes a $1,000 LTCG.
• B)Nutt's stock basis is $2,000.
• C)Nutt's ordinary income is $15,000.
• D)Nutt's tax-free return of capital is $11,000.
• E)None of the above.

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Definitions:

Cuticle

The cuticle is a protective and waxy or hard outer layer found on the surface of plants, hairs, nails, and other surfaces, serving as a barrier against environmental damage.

Medulla

A section of the brainstem that controls vital bodily functions such as heartbeat and breathing.

Hair Root

The part of the hair located below the surface of the epidermis.

Hair Shaft

The visible part of the hair that extends above the skin surface, made of keratin and dead skin cells.