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?
A. $85,000.
B. $90,000.
C. $45,000.
D. $50,000.
E. None of the choices are correct.
Answer: C
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