Longhorn Company Reports Current E&P of $100,000 in 20X3 Anda

question 112

Multiple Choice

Longhorn Company reports current E&P of $100,000 in 20X3 anda deficit of ($200,000) in accumulated E&P at the beginning of the year. Longhorn distributed $300,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $100,000. How is the distribution treated by the shareholder in 20X3?

• A)$300,000 dividend
• B)$100,000 dividend, $100,000 tax-free return of basis, and $100,000 capital gain
• C)$100,000 dividend and $200,000 tax-free return of basis
• D)$0 dividend, $100,000 tax-free return of basis, and $200,000 capital gain

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Definitions:

Interpersonal Attraction

The force that draws people together and contributes to the desire for a continued relationship, whether platonic or romantic.

Elusive Power

A form of influence that is difficult to define, grasp, or directly observe.

Power

Involves the capacity or ability of an individual or group to influence or control the actions of others in a desired direction.

Authority

The power or right to give orders, make decisions, and enforce obedience.