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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