Question

Maggie, the sole shareholder, had a basis of $60,000 in the stock of Livingston Corporation which she sold to Ruth on July 31, 2020 for $140,000. Livingston Corporation had positive Accumulated Earnings And Profits (E&P) of $70,000 on January 1, 2020 and positive Current Earnings And Profits (E&P) for 2020 of $50,000. During 2020, Livingston Corporation made the following distributions: $100,000 Cash to Maggie on July 1, 2020 and $100,000 Cash to Ruth on December 31, 2020. Ruth will have Taxable Dividend Income for 2020 of:

		$100,000.
		$ 60,000.
		$ 25,000.
		$ 95,000.

Answer 1

As per data ,

Ruth received $100000 from Livingston corporation

Ruth purchased a stock from Maggie for $ 140,000

Maggie sold stock to Ruth $140,000 which he purchased from $60,000.

Taxable dividend is $100,000. For 2020

Then the option 1 is the correct answer.

Option 2) $60000 not possible because it less than which he received

Option 3)25,000 is not possible because it is less than which he received

Option 4)95000 is not possible because it less than which he received

Note : purchase of stock by other person is not came as dividend payouts and calculations

The other option are less than 1 option

Then

Ruth will have Taxable Dividend Income for 2020 of $100,000.