Adam Owns 100% of Banana Company and Has a Basis

question 105

Multiple Choice

Adam owns 100% of Banana Company and has a basis of $60,000 in its stock.The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000.Adam has a:

• A)Nontaxable distribution of $18,000.
• B)Capital gain of $12,000.
• C)Dividend of $72,000.
• D)Nontaxable distribution of $6,000.

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