Monal Corporation Merged with Bobwhite Corporation Two Years Ago

question 8

Multiple Choice

Monal Corporation merged with Bobwhite Corporation two years ago. At the time of the merger, Monal held an earnings and profits (E & P) deficit of $250,000 and Bobwhite had a positive E & P of $200,000. Last year's current E & P was $ 100,000 for the successor company. Despite having only $10,000 E & P for the current year, Monal makes a distribution to its shareholders of $270,000. How is the distribution taxed to the shareholders?

• A)$270,000 is taxable.
• B)$200,000 is taxable.
• C)$110,000 is taxable.
• D)$50,000 is taxable.
• E)None of the above amounts is correct.

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