Tony Is the 100% Shareholder of a Corporation Established Five

Multiple Choice

Tony is the 100% shareholder of a corporation established five years ago.It has always been an S corporation.After adjustment for this year's corporate income,but before taking distributions into account,Tony has a $50,000 stock basis.The corporation pays Tony a $40,000 cash distribution.As a result of this distribution,Tony will have an ending stock basis and recognized income of

A) $$\begin{array} { | l | l | } \hline \text { Income } & \\\text { recognized } & \text { Stock basis } \\\hline \$ 0 & \$ 10,000 \\\hline\end{array}$$
B) $$\begin{array} { | l | l | } \hline \text { Income } & \\\text { recognized } & \text { Stock basis } \\\hline \$ 40,000 & \$ 50,000 \\\hline\end{array}$$
C) $$\begin{array} { | l | l | } \hline \text { Income } & \\\text { recognized } & \text { Stock basis } \\\hline \$ 0 & \$ 40,000 \\\hline\end{array}$$
D) $$\begin{array} { | l | l | } \hline \text { Income } & \\\text { recognized } & \text { Stock basis } \\\hline \$ 40,000 & \$ 10,000 \\\hline\end{array}$$