How much if any of the distribution is taxable

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Problem 1: At the beginning of the year, Clampett, Inc., had $100,000 in its AAA and $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 percent 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?

Multiple Choice

Option 1: $0.

Option 2: $15,000.

Option 3: $27,500.

Option 4: $40,000.

Option 5: None of the choices are correct.

Reference no: EM132622448

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