Blue Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Blue distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $52,500. As a result of the distribution, Sam has: Oa. Dividend income of $52,500 and reduces his stock basis to zero. Ob. Dividend income of $225,000 and no adjustment to stock basis. Oc. No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000. Od. Dividend income of $225,000 and reduces his stock basis to $27,500. e. None of these choices are correct.

Blue Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Blue distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $52,500. As a result of the distribution, Sam has: Oa. Dividend income of $52,500 and reduces his stock basis to zero. Ob. Dividend income of $225,000 and no adjustment to stock basis. Oc. No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000. Od. Dividend income of $225,000 and reduces his stock basis to $27,500. e. None of these choices are correct.

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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