In June of the Current Year, Marigold Corporation Declares a $4

question 92

Multiple Choice

In June of the current year, Marigold Corporation declares a $4 dividend out of E & P on each share of common stock to shareholders of record on August 1. Ellen and Tim each purchase 100 shares of Marigold stock on July 1. On July 15, Ellen also purchases a short position in Marigold. Tim sells 50 of his shares on August 10 and continues to hold the remaining 50 shares through the end of the year. Ellen closes her short position in Marigold on October 15. With respect to the dividends, which of the following is correct?

• A) Ellen will have $400 of qualifying dividends subject to reduced tax rates and $400 of ordinary income (from dividends paid on the short position of Marigold stock).
• B) Tim will have $200 of qualifying dividends subject to reduced tax rates and $200 of ordinary income.
• C) All $800 of Ellen's dividends will qualify for reduced tax rates.
• D) All $400 of Tim's dividends will qualify for reduced tax rates.
• E) None of these.

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Definitions:

General Ledger

A comprehensive record of all financial transactions occurring within a company, organized by account, used to compile financial statements.

Control Accounts

General ledger accounts that summarize the details of a subsidiary ledger, facilitating the consolidation and reporting process.

Enterprise Resource Planning

A type of software that organizations use to manage day-to-day business activities such as accounting, procurement, project management, and manufacturing.

Human Resource Management

A function in organizations designed to maximize employee performance in service of an employer's strategic objectives.