Which of the Following Statements Best Describes the Priority of the Tax

question 79

Multiple Choice

Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?

• A)The distribution is a dividend to the extent of the corporation's E&P, then a return of capital, and finally gain from sale of stock.
• B)The distribution is a return of capital, then a dividend to the extent of the corporation's E&P, and finally gain from sale of stock.
• C)The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's E&P.
• D)The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's E&P or a return of capital, followed by gain from sale of stock.

---

Definitions:

Output

The total amount of goods or services produced by a company, industry, or economy.

Perfect Competitor

A hypothetical market structure in which no individual firm has any market power, allowing for an ideal level of competition where prices reflect actual costs.

Imperfect Competitor

A market participant who does not meet the conditions of perfect competition, often having some control over the price of its product or service.

MRP Schedule

A table showing the marginal revenue product (MRP) which is the additional revenue generated from using one more unit of a resource.