Blue Corporation Has a Deficit in Accumulated E & P

question 105

Multiple Choice

Blue Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Blue distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $52,500. As a result of the distribution, Sam has:

• A) Dividend income of $225,000 and reduces his stock basis to $27,500.
• B) Dividend income of $52,500 and reduces his stock basis to zero.
• C) Dividend income of $225,000 and no adjustment to stock basis.
• D) No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000.
• E) None of these.

---

Definitions:

Mode

The value that appears most frequently in a data set, a measure of central tendency.

Scores

Quantitative measures used to evaluate performance in various contexts, such as tests, games, or assessments.

Case Histories

Detailed records of an individual's background, symptoms, the course of a disease or condition, and the response to treatment, often used in medical and psychological contexts for analysis and study.

Naturalistic Observation

A research method in which subjects are observed in their natural environment without any manipulation by the observer.