Assume that at the end of 2020, Clampett, Incorporated (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, Incorporated, has no corporate earnings and profits and J. D. has a basis of $50,000 in his Clampett, Incorporated, stock. What is J. D.'s stock basis after the distribution

$45,000

Explanation:

Calculation to determine J.D.'s stock basis after the distribution

Using this formula

J.D.'s stock basis=Original basis+distributive share of the gain on the distribution -Distribution

Let plug in the formula

J.D.'s stock basis=$50,000+($40,000-$5,000)-$40,000

J.D.'s stock basis= $50,000 + $35,000 − $40,000

J.D.'s stock basis= $45,000

Therefore J.D.'s stock basis after the distribution

is $45,000

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