Borneo Corporation Has $21,000 in Current Earnings and Profits and $5,000

question 72

Multiple Choice

Borneo Corporation has $21,000 in current earnings and profits and $5,000 of accumulated earnings and profits.Borneo distributes $20,000 of income to its shareholders on June 15 and another $10,000 on December 15.How much of the December 15 distribution is taxable as a dividend?

• A)$21,000
• B)$10,000
• C)$7,000
• D)$5,000

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Definitions:

Deductible IRA Contribution

A contribution to an Individual Retirement Account that can be subtracted from gross income, reducing taxable income.

Pension Plan

A retirement savings plan provided by an employer which guarantees a specified income to the employee upon retirement.

SIMPLE Plan

A Savings Incentive Match Plan for Employees that allows employees and employers to contribute to traditional IRAs set up for employees, intended for small businesses.

Tax-deferred Plans

Investment accounts, such as 401(k)s or IRAs, where contributions are tax-deductible and taxes on earnings are delayed until withdrawal.