Rap, Inc., was organized in January 2019 and immediately made an S election. Rap, Inc.s stock is entirely owned by Howard, who contributed $40,000 to start the business. Rap reported the following results for the 2019 year: Ordinary income $36,000 Short-term capital loss 4,000 Charitable contributions 1,000 Tax-exempt income 1,000 Sec. 179 deduction 10,000 On April 12, 2019, Howard received a $30,000 cash distribution from the corporation. What is the adjusted basis of his stock on January 1, 2020?

a. $41,000

b. $32,000

c. $31,000

d. $10,000

Please advise why B is correct answer.