Beaver Company Reports Current E&P of $100,000 in 20X3 and Accumulated

question 90

Multiple Choice

Beaver Company reports current E&P of $100,000 in 20X3 and accumulated E&P at the beginning of the year of $200,000. Beaver distributed $400,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in her stock in Beaver is $200,000. How is the distribution treated by the shareholder in 20X3?

• A)$400,000 dividend
• B)$100,000 dividend, $200,000 tax-free return of basis, and $100,000 capital gain
• C)$200,000 dividend and $200,000 tax-free return of basis
• D)$300,000 dividend and $100,000 tax-free return of basis