During the year, Miles Nutt, the sole shareholder of a calendar year S corporation, received a distribution of $16,000. At the end of last year, his stock basis was $4,000. The corporation earned $11,000 ordinary income during the year. It has no accumulated E & P. Which statement is correct?
A. Nutt recognizes a $1,000 LTCG.
B. Nutt’s stock basis is $2,000.
C. Nutt’s ordinary income is $15,000.
D. Nutt’s tax-free return of capital is $11,000.
Answer: A
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