Beaver Company Reports Current E&P of $100,000 in 20X3 and Accumulated

question 90

Multiple Choice

Beaver Company reports current E&P of $100,000 in 20X3 and accumulated E&P at the beginning of the year of $200,000. Beaver distributed $400,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in her stock in Beaver is $200,000. How is the distribution treated by the shareholder in 20X3?

• A)$400,000 dividend
• B)$100,000 dividend, $200,000 tax-free return of basis, and $100,000 capital gain
• C)$200,000 dividend and $200,000 tax-free return of basis
• D)$300,000 dividend and $100,000 tax-free return of basis

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Definitions:

Ngo Dinh Diem

The first president of South Vietnam, serving from 1955 until his assassination in 1963, known for his autocratic rule.

Strategy of Attrition

A military strategy aiming to wear down the enemy to the point of collapse through continuous losses in personnel and material.

Free Fire Zones

Areas designated during armed conflict where any person encountered can be shot on sight, typically used to denote enemy-controlled areas where combatants may assume anyone to be hostile.

Détente

A period of improved relations between the United States and the Soviet Union during the Cold War, marked by the signing of treaties and a reduction in hostility.