ABC Corporation’s beginning balance of accumulated earnings and profits is a deficit of $100,000. It had...
- ABC Corporation’s beginning balance of accumulated earnings and profits is a deficit of $100,000. It had current earnings and profits of $20,000. On March 1, the Corporation distributed $45,000 to its sole shareholder, R, who had a basis in his stock of $30,000. R will report:_____
- no dividend income and a capital gain of $15,000
- a dividend of $20,000 and return of capital of $25,000
- a dividend of $20,000 and capital gain of $25,000
- no dividend income and a capital gain of $25,000
Homework Answers
Answer: [b] a dividend of $20000 and return of capital of $25000
Explanation:
As the current profits are $20000, $20000 of the total distribution would be deemed dividends and the balance payment would be return of capital.
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