Exit Corporation Has Accumulated E&P of $24,000 at the Beginning

question 25

Multiple Choice

Exit Corporation has accumulated E&P of $24,000 at the beginning of the current tax year. Current E&P is $20,000. During the year, the corporation makes the following distributions to its sole shareholder who has a $22,000 basis for her stock. The treatment of the $15,000 August 1 distribution would be

• A) $15,000 is taxable as a dividend; $5,000 from current E&P and the balance from accumulated E&P.
• B) $15,000 is taxable as a dividend from accumulated E&P.
• C) $4,000 is taxable as a dividend from accumulated E&P, and $11,000 is tax-free as a return of capital.
• D) $5,000 is taxable as a dividend from current E&P, and $10,000 is tax-free as a return of capital.

---

Definitions:

Hamdi v. Rumsfeld

A landmark Supreme Court case decided in 2004 that recognized the power of the government to detain enemy combatants, including U.S. citizens, but also established detainees' rights to challenge their detention.

Foreign Intelligence

Information relating to the capabilities, intentions, or activities of foreign governments or non-state actors.

Departmentalist

A theory in U.S. constitutional law holding that each branch of the government has the authority to interpret the Constitution in its administration of its own powers.

Supreme Court Interpreter

The term "Supreme Court interpreter" generally refers to the role of the Supreme Court in interpreting the Constitution, laws, and statutes of the United States.