Hance Corporation Has a $20,000 Deficit in Earnings and Profits

question 37

Multiple Choice

hance Corporation has a $20,000 deficit in earnings and profits as of January 1, 2014. During 2014, the corporation has current earnings and profits of $40,000 and makes a $70,000 cash distribution to its shareholders. What part of the distribution is taxable as dividend income to Chance's shareholders?

• A) $- 0 -
• B) $20,000
• C) $30,000
• D) $40,000
• E) $70,000

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Definitions:

Liable

Legally responsible or answerable for an action or a situation.

Scope of Authority

The range or extent of power that an individual or organization legally has to make decisions or take action.

Agent

An individual or entity authorized to act on behalf of another person or entity in business matters or legal transactions.

Liable

Legally responsible for one's actions or for a particular outcome.