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

question 13

Multiple Choice

Longhorn Company reports current E&P of $100,000 in 20X3 and accumulated E&P at the beginning of the year of negative $200,000. Longhorn distributed $300,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $100,000. How is the distribution treated by the shareholder in 20X3?

• A) $300,000 dividend.
• B) $100,000 dividend, $100,000 tax-free return of basis, and $100,000 capital gain.
• C) $100,000 dividend and $200,000 tax-free return of basis.
• D) $0 dividend, $100,000 tax-free return of basis, and $200,000 capital gain.

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Definitions:

Team Synergies

The enhanced or multiplied effects achieved by a team when members work together effectively, surpassing the results of individual efforts.

Csikszentmihalyi's Flow Model

A framework identifying the psychological state in which a person is fully immersed in an activity, leading to a feeling of complete absorption and enjoyment.

Losing Control

is the process or feeling of not being able to manage or influence events or outcomes, often leading to stress or anxiety.

Challenge And Stress

The psychological and physical responses to demands or pressures that are perceived as opportunities for growth or threats to well-being, respectively.