Assume that at the end of 2018, Clampett, Inc. (an S corporation) distributes property (fair market value of $47,500, basis of $7,500) to each of its four equal shareholders (aggregate distribution of $190,000). At the time of the distribution, Clampett, Inc. has no corporate E&P and J. D. has a basis of $51,000 in his Clampett, Inc. stock. How much income does J. D. recognize as a result of the distribution?

Multiple Choice

• $0.

• $40,000.

• None of the choices are correct.

• $7,500.

• $47,500.