Assume that at the end of 2019, Clampett, Inc. (an S corporation) distributes property (fair market value of $40,000, basis of $5,000) to each of its four equal shareholders (aggregate distribution of $160,000). At the time of the distribution, Clampett, Inc., has no corporate earnings and profits and J.D. has a basis of $50,000 in his Clampett, Inc., stock. How much income does J.D. recognize as a result of the distribution

The correct answer is D.

Explanation:

Giving the following information:

You currently have $5,400. First United Bank will pay you an annual interest rate of 8.9, while Second National Bank will pay you an annual interest rate of 10.

We need to calculate the amount of time of each bank using the following formula:

n=[ln(FV/PV)]/ln(1+r)

First bank:

n= ln(13,900/5,400) / ln(1.089)= 11.089 years

0.089*365= 32 days

n= 11 years and 32 days

Second bank:

n= ln(13,900/5,400) / ln(1.10)= 9.92 years

0.92*365= 336 days

n= 9 years and 336 days

Difference= 11.089 - 9.92= 1.17 years