A Calendar-Year Corporation Has Negative Current E&P of $500 and Accumulated

question 71

Multiple Choice

A calendar-year corporation has negative current E&P of $500 and accumulated positive E&P of $1,000. The corporation makes a $600 distribution to its sole shareholder. Which of the following statements is true?

• A) Up to $600 of the distribution could be a dividend depending on the balance in accumulated earnings and profits on the date of the distribution.
• B) $0 of the distribution will be a dividend because current earnings and profits are negative.
• C) $500 of the distribution will be a dividend because total earnings and profits is $500.
• D) $600 of the distribution will be a dividend because accumulated earnings and profits is $1,000.

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