Carlota Owns 4% of Express Corporation and Has a Basis

question 70

Multiple Choice

Carlota owns 4% of Express Corporation and has a basis of $5,000 in her stock. During the year, Express distributes a $300,000 dividend. As a result of the dividend, Carlota has

• A)$12,000 of dividend income.
• B)$5,000 of dividend income and $7,000 of capital gain.
• C)$7,000 of dividend income and a $5,000 tax-free return of capital.
• D)$5,000 of dividend income, $5,000 tax-free return of capital, and a $2,000 capital gain.
• E)$7,000 capital gain.

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Definitions:

Depreciation

An accounting method of allocating the cost of a tangible or physical asset over its useful life or life expectancy.

GDP Deflator

A measure of the price level of all newly produced, domestic, final goods and services in an economy, used to adjust GDP for inflation.

GDP Deflator

A means of determining the price rates for all new, domestically crafted, final goods and services within an economy.

Real GDP

Real GDP (Gross Domestic Product) measures a country's economic output adjusted for inflation, providing a more accurate view of an economy's size and growth rate over time.