Keisha Owns 100% of DEF Company and Has a Basis

question 22

Multiple Choice

Keisha owns 100% of DEF Company and has a basis of $10,000 in its stock.DEF has earnings and profits of $9,000 and distributes a cash dividend to Keisha of $12,000.Keisha has a:

• A)Capital gain of $2,000.
• B)Dividend of $12,000.
• C)Nontaxable distribution of $1,000.
• D)Nontaxable distribution of $3,000.