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

question 43

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 earnings and profits, 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 earnings and profits, 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 earnings and profits.
• D)The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock.

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Definitions:

Sheriff's Office

A local law enforcement agency led by a sheriff, responsible for keeping peace, enforcing laws, and executing court orders.

Option Contract

A contract which grants the holder the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.

Unilateral Contract

is a type of contract where only one party makes a promise or undertakes a performance obligation in exchange for an act by the other party, creating a binding agreement once the act is performed.

Revocable Offer

An offer that can be withdrawn by the offering party before it is accepted by the offeree, typically within a certain time frame.