At the Beginning of the Year, Clampett, Incorporated, Had $100,000

Multiple Choice

At the beginning of the year, Clampett, Incorporated, had $100,000 in its AAA and $60,000 of earnings and profits from prior C corporation years. During the year, Clampett, Incorporated, earned $50,000 of ordinary income and paid $200,000 in distributions to its shareholders. Assume that J.D. owns 25percent of Clampett, Incorporated, his basis in Clampett, Incorporated, at the beginning of the year is $10,000, and his share of the distribution was $50,000. How much, if any, of the distribution is taxable as a capital gain?

A) $0
B) $15,000
C) $27,500
D) $40,000
E) None of the choices are correct.