A Calendar-Year Corporation Has a $75,000 Current E&P Amount,and a $25,000

A calendar-year corporation has a $75,000 current E&P amount,and a $25,000 positive accumulated E&P balance at the beginning of the year.Shareholders of the corporation have a total basis in outstanding shares of $40,000.The corporation pays a $120,000 distribution to the shareholders.The tax results to the shareholders will be

A) dividend income of $100,000 and capital gain of $20,000.
B) dividend income of $60,000 and capital gain of $60,000.
C) dividend income of $100,000 and no other consequences.
D) dividend income of $100,000 and a tax-free return of capital of $20,000.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free