Clampett, Incorporated, has been an S corporation since its inception. On July 15, 2021, Clampett, Incorporated, distributed $50,000 to J. D. His basis in his Clampett, Incorporated, stock on January 1, 2021, was $45,000. For 2021, J. D. was allocated $10,000 of ordinary income from Clampett, Incorporated, and no separately stated items. What is the total amount of income J. D. recognizes related to Clampett, Incorporated, in 2021

the total amount of income J.D. recognizes related to Clampett, Incorporated, in 2021 =$5,000

Explanation:

Income  of J.D related to Clampett = Ordinary income + Capital gain

Given that Basis distribution = $50,000

                   Basis stock = $45,000

                  Ordinary income = $10,000

But Capital gain  = Basis distribution -( Basis stock  + Ordinary income)

Capital gain = $50,000 - ($45,000 +$10,000)

Capital gain =  $50,000 - $55,000

Capital gain =  = - $5,000

Therefore J.D. income related to Clampett = Ordinary income + Capital gain =$10,000 +(- $5,000)

=$10,000 - $5,000

=$5,000

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