Ashley and Andrew, Equal Shareholders in Parrot Corporation, Receive $250,000

question 44

Multiple Choice

Ashley and Andrew, equal shareholders in Parrot Corporation, receive $250,000 each in distributions on December 31 of the current year.During the current year, Parrot sold an appreciated asset for $500,000 (basis of $150,000) . Payment for the sale of the asset will be made as follows: 50% next year and 50% in the following year, with interest payable at a rate of 7.5%.Before considering the effect of the asset sale, Parrot's current year E & P is $400,000 and it has no accumulated E & P. How much of Ashley's distribution will be taxed as a dividend?

• A)$0.
• B)$200,000.
• C)$250,000.
• D)$425,000.
• E)None of the above.

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Definitions:

Sclera

The white outer layer of the eyeball, providing protection and structural support.

Pacinian Corpuscles

Sensory receptors located deep in the skin and responsive to pressure and vibration.

Meissner Corpuscles

A type of tactile mechanoreceptor found in the glabrous (hairless) skin, responsible for sensitivity to light touch.

Krause End Bulbs

Sensory receptors located primarily in the mucous membranes and are known for their role in detecting cold sensations in humans.