Husker Corporation Reportsa Deficit in Current E&P of ($200,000)in 20X3

question 53

Multiple Choice

Husker Corporation reportsa deficit in current E&P of ($200,000) in 20X3 and accumulated E&P at the beginning of the year of $300,000. Husker distributed $200,000 to its sole shareholder on December 31, 20X3. The shareholder's tax basis in her stock in Husker is $50,000. How is the distribution treated by the shareholder in 20X3?

• A)$200,000 dividend
• B)$100,000 dividend, $50,000 tax-free return of basis, and $50,000 capital gain
• C)$100,000 dividend and $100,000 tax-free return of basis
• D)$0 dividend, $50,000 tax-free return of basis, and $150,000 capital gain

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Definitions:

Canadian Dollar

The official currency of Canada, abbreviated as CAD.

Samurai Bond

A Japanese yen-denominated bond issued in Japan by a non-Japanese entity.

Japan

A country located in East Asia, known for its rich culture, technological advancements, and economic significance.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, usually corporations or governmental agencies, which includes the terms of the loan, interest payments, and the time at which the loaned funds must be repaid.