Homework Answers
Answer-The correct option is a-Dividend income of $225,000 and reduces his stock basis to $27,500.
Explanation:
Since the current Earning and profit = $225,000
Dividend income =$250,000
Sam basis in stock = $52,500
To calculate taxable dividend
Dividend income - Stock basis = taxable dividend
250,000 - 52,500 = 197,500
To calculate reduction in stock basis
Current E &P - taxable dividend = reduction stock basis
225,000 - 197,500 = 27,500
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