Oreo Corporation Has Accumulated E&P of $8,000 at the Beginning

question 74

Multiple Choice

Oreo Corporation has accumulated E&P of $8,000 at the beginning of the current year. During the year (a nonleap year) , the corporation incurs a current E&P deficit of $18,250. The corporation distributes $11,000 on March 20th to Morris, its sole shareholder, who has a $9,000 basis for his stock. If the exact loss cannot be determined as of the date of distribution, the treatment of the distribution will be

• A)$4,100 dividend and a $6,900 capital gain.
• B)$11,000 return of capital.
• C)$4,100 dividend and a $6,900 tax free return of capital.
• D)$8,000 dividend and a $3,000 return of capital.

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Definitions:

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An agreement between two or more parties that is legally binding and creates reciprocal obligations that can be enforced by law.

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Decorative material used to cover and adorn the interior walls of homes, offices, and other buildings.

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Compulsion, force, or undue pressure exerted upon a person to coerce them into performing an act against their will.