Tracy and Lance, Equal Shareholders in Macaw Corporation, Receive $600,000

question 85

Multiple Choice

Tracy and Lance, equal shareholders in Macaw Corporation, receive $600,000 each in distributions on December 31 of the current year. Macaw's current year taxable income is $1 million and it has no accumulated E & P. Last year, Macaw sold an appreciated asset for $1,200,000 (basis of $400,000) . Payment for one-half of the sale of the asset was made this year. How much of Tracy's distribution will be taxed as a dividend?

• A) $0
• B) $300,000
• C) $500,000
• D) $600,000
• E) None of the above

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Definitions:

P-value

The likelihood of achieving equally extreme or more extreme test results than those observed, with the presupposition that the null hypothesis is correct.

Confidence Interval Estimate

A range of values, derived from sample data, that is likely to contain the value of an unknown population parameter, expressed with a certain level of confidence.

Proportion of Defectives

The fraction or percentage of items in a batch or production that are considered defective or fail to meet quality standards.

Production Line

An orderly sequence of workstations or machines used to assemble a product in a systematic and efficient manner.