22) A calendar-year corporation has a $15,000 current E&P deficit and a $40,000 positive accumulated E&P balance. The shareholders of the corporation have a total basis in outstanding shares of $30,000. A $75,000 distribution is made to the shareholders on the last day of the year. The tax results to the shareholders will be A) dividend income of $0, a tax-free return of capital of $30,000, and capital gain of $45,000. B) dividend income of $40,000, a tax-free return of capital of $30,000, and capital gain of $5,000. C) dividend income of $25,000, a tax-free return of capital of $5,000, and capital gain of $45,000. D) dividend income of $25,000, a tax-free return of capital of $30,000, and capital gain of $20,000.

22) A calendar-year corporation has a $15,000 current E&P deficit and a $40,000 positive accumulated E&P balance. The shareholders of the corporation have a total basis in outstanding shares of $30,000. A $75,000 distribution is made to the shareholders on the last day of the year. The tax results to the shareholders will be A) dividend income of $0, a tax-free return of capital of $30,000, and capital gain of $45,000. B) dividend income of $40,000, a tax-free return of capital of $30,000, and capital gain of $5,000. C) dividend income of $25,000, a tax-free return of capital of $5,000, and capital gain of $45,000. D) dividend income of $25,000, a tax-free return of capital of $30,000, and capital gain of $20,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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