Longhorn Company reports current E&P of $200,000 in 20x3 and accumulated E&P at the beginning of the year of negative $400,000. Longhorn distributed $600,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $200,000. How is the distribution treated by the shareholder in 20X3? 1. $200,000 dividend. 2. $200,000 dividend, $200,000 tax-free return of basis, and $200,000 capital gain. 3. $200,000 dividend and $400,000 tax-free return of basis. 4. $0 dividend, $200,000 tax-free return of basis, and $400,000 capital gain.

Longhorn Company reports current E&P of $200,000 in 20x3 and accumulated E&P at the beginning of the year of negative $400,000. Longhorn distributed $600,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $200,000. How is the distribution treated by the shareholder in 20X3? 1. $200,000 dividend. 2. $200,000 dividend, $200,000 tax-free return of basis, and $200,000 capital gain. 3. $200,000 dividend and $400,000 tax-free return of basis. 4. $0 dividend, $200,000 tax-free return of basis, and $400,000 capital gain.

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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