Husker Corporation Reports Current E&P of Negative $200,000 in 20X3

question 98

Multiple Choice

Husker Corporation reports current E&P of negative $200,000 in 20X3 and accumulated E&P at the beginning of the year of $300,000. Husker distributed $200,000 to its sole shareholder on December 31, 20X3. The shareholder's tax basis in her stock in Husker is $50,000. How is the distribution treated by the shareholder in 20X3?

• A) $200,000 dividend.
• B) $100,000 dividend, $50,000 tax-free return of basis, and $50,000 capital gain.
• C) $100,000 dividend and $100,000 tax-free return of basis.
• D) $0 dividend, $50,000 tax-free return of basis, and $150,000 capital gain.

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