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.

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Definitions:

Organizational Performance

The measure of an organization's efficiency, effectiveness, and capability of achieving its goals and objectives.

Organizational Dissent

The expression of disagreement or contradictory opinions within an organization.

Illegitimate Practices

Activities or behaviors that are unethical, illegal, or not sanctioned by legitimate authority within a given context.

Illegal

Refers to actions or activities that violate the law or legal norms.