Assume that at the end of 2019, Clampett, Inc. (an S corporation) distributes property (fair market value of $40,000, basis of $5,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Inc., has no corporate earnings and profits and J. D. has a basis of $50,000 in his Clampett, Inc., stock. What is J. D.'s stock basis after the distribution

Question

Sam Golden

Business

1 June, 05:30

Assume that at the end of 2019, Clampett, Inc. (an S corporation) distributes property (fair market value of $40,000, basis of $5,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Inc., has no corporate earnings and profits and J. D. has a basis of $50,000 in his Clampett, Inc., stock. What is J. D.'s stock basis after the distribution

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Answers (1)

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Zander Copeland · Answer 1

J. D.'s stock basis after the distribution is $85,000

Explanation:

In order to calculate the J. D.'s stock basis after the distribution we would have to use the following formula:

J. D.'s stock basis after the distribution=original basis + increase/decrease in basis from gain from property distribution

original basis=$50,000

basis from gain from property distribution=$40,000-$5,000

basis from gain from property distribution=$35,000

Therefore, J. D.'s stock basis after the distribution=$50,000+$35,000

J. D.'s stock basis after the distribution=$85,000