Beaver Company Reports Current E&P of $100,000 in Year 1

question 12

Multiple Choice

Beaver Company reports current E&P of $100,000 in year 1 and accumulated E&P at the beginning of the year of $200,000.Beaver distributed $400,000 to its sole shareholder on January 1, year 1.The shareholder's tax basis in her stock in Beaver is $200,000.How is the distribution treated by the shareholder in year 1?

• A)$400,000 dividend.
• B)$100,000 dividend, $200,000 nontaxable return of basis, and $100,000 capital gain.
• C)$200,000 dividend and $200,000 nontaxable return of basis.
• D)$300,000 dividend and $100,000 nontaxable return of basis.

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Definitions:

Phobia

An extreme or irrational fear or aversion to something, often resulting in avoidance behavior and distress.

Systematic Desensitization

A therapeutic technique used to help individuals overcome phobias and anxiety, involving gradual exposure to the feared object or situation.

Phobia Development

The process through which an irrational and intense fear of a specific object, scenario, or activity is formed, often resulting from a negative experience or predisposition.

Watson's Hypothesis

A theory suggesting that all human behaviors can be conditioned, put forward by John B. Watson, a pioneer in behaviorism.