Lamont is a 100% owner of JKL Corporation. JKL has been an S corporation since its inception in 2017. During 2018, JKL distributed $20,000 to Lamont. During 2018, JKL reported $5,000 of business income and no separately stated items. What is the amount and character of the gain on the distribution, if any, Lamont must recognize in each of the following alternative scenarios? Also, what is Lamont's stock basis at the end of 2018 in each of the following scenarios?

a. Lamont's stock basis at the beginning of 2018 was $30,000.

Amount of gain

Character of gain (Long-term capital gain, Short-term capital gain, No gain)

Basis at the end of 2018

b. Lamont's stock basis at the beginning of 2018 was $4,000.

Amount of gain

Character of gain (Long-term capital gain, Short-term capital gain, No gain)

Basis at the end of 2018

Answer rating: 100% (QA)

a Lamont does not recognize any gain on the distrib... View the full answer