1, Mark owns 50% of an S corporation, Wick, Inc., and has a basis in that corporation of $3,000 at the beginning of Year 1. At the end of Year 1, Wick reports ordinary income of $2,000 and makes a distribution to Mark of a truck with an adjusted basis of $5,000 and a fair market value of $7,000. How much income must Mark report on his personal Year 1 return from this distribution?

A.		$0
B.	$1,000

C.	$3,000
D.	$5,000

2. Mr. Sharp received a distribution from an S corporation that was in excess of the basis of his stock in the corporation. The S corporation had no accumulated earnings and profits. Mr. Sharp should treat the distribution in excess of his basis as

A.		A return of capital.
B.	A capital gain.

C.	Previously taxed income.
D.	A reduction in the basis of his stock.