Tracy and Lance, Equal Shareholders in Macaw Corporation, Receive $600,000

question 74

Multiple Choice

Tracy and Lance, equal shareholders in Macaw Corporation, receive $600,000 each in distributions on December 31 of the current year. Macaw's current-year taxable income is $1 million and it has no accumulated E & P. Last year, Macaw sold an appreciated asset for $1,200,000 (basis of $400,000) . Payment for one-half of the sale of the asset was made this year. How much of Tracy's distribution will be taxed as a dividend?

• A) $0
• B) $300,000
• C) $500,000
• D) $600,000
• E) None of these.

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Definitions:

Rituals

Prescribed or established ceremonies that are often performed for religious, cultural, or social purposes, characterized by a series of formal actions.

Major Depression

A mental disorder characterized by persistent sadness, loss of interest in activities, and a range of emotional and physical problems.

Emotional

Pertaining to feelings or emotions, often describing intense, complex, or subjective experiences related to mood, temperament, or relationships.

Behavioral

Refers to the study of how organisms interact with their environment and the resulting changes in their behavior.