Swan,a Calendar Year Corporation,has a Deficit in Current E

question 37

Multiple Choice

Swan,a calendar year corporation,has a deficit in current E & P of $200,000 and a $580,000 positive balance in accumulated E & P.If Swan determines that a $1 million distribution to its shareholders is appropriate at some point during the year,what is the maximum amount of the distribution that could potentially be treated as a dividend?

• A)$0.
• B)$380,000.
• C)$480,000.
• D)$580,000.
• E)None of the above.

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Definitions:

Ordinary Income

Income earned from providing services, including wages, salaries, tips, and commissions, as well as income from investments that are not considered capital gains.

Nondeductible Items

Expenses or items that cannot be subtracted from gross income to reduce taxable income according to tax laws.

Partnership Interest

An ownership share in a partnership that entitles the holder to a portion of the entity's profits and losses.

FMV

Fair Market Value, the price at which property would sell on the open market between a willing buyer and a willing seller.