Aaron and Michele, Equal Shareholders in Cavalier Corporation, Receive $25,000

question 68

Multiple Choice

Aaron and Michele, equal shareholders in Cavalier Corporation, receive $25,000 each in distributions on December 31 of the current year. During the current year, Cavalier sold an appreciated asset for $60,000 (basis of $15,000) . Payment for the sale of the asset will be made as follows: 50% next year and 50% in the following year, with interest payable at a rate of 6 percent. Before considering the effect of the asset sale, Cavalier's current year E & P is $40,000 and it has no accumulated E & P. How much of Aaron's distribution will be taxed as a dividend?

• A) $0
• B) $20,000
• C) $25,000
• D) $42,500
• E) None of the above

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Definitions:

Child Maltreatment

Encompasses all forms of physical and emotional ill-treatment, sexual abuse, neglect, and exploitation that results in actual or potential harm to the child's health, development, or dignity.

Coping Skills

Techniques or strategies used to manage stress, challenges, or emotional conflicts in a productive manner.

Motor Skill Deficits

Impairments in the ability to perform movements requiring coordination and dexterity.

Hyperactive

Exhibiting behavior characterized by excessive movement, impulsivity, and difficulty with maintaining attention.