Blue Corporation Has a Deficit in Accumulated E & P

question 160

Multiple Choice

Blue Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Blue distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $52,500. As a result of the distribution, Sam has:

• A) Dividend income of $225,000 and reduces his stock basis to $27,500.
• B) Dividend income of $52,500 and reduces his stock basis to zero.
• C) Dividend income of $225,000 and no adjustment to stock basis.
• D) No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000.
• E) None of the above.

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Definitions:

Multiple Regression Model

A statistical technique used to predict the value of a dependent variable based on the values of two or more independent variables.

Multiple Coefficient

Often refers to the multiple correlation coefficient in statistics, describing the strength and direction of a linear relationship between more than two variables.

Determination

In statistical analysis, it often refers to the extent to which variation in one variable determines or predicts the variation in another variable, commonly assessed with the coefficient of determination (R²).

Observations

Data points or values collected during an experiment or survey.