A Calendar-Year Corporation Has Positive Current E&P of $500 and Accumulated

question 28

Multiple Choice

A calendar-year corporation has positive current E&P of $500 and accumulated negative E&P of $1,200.The corporation makes a $400 distribution to its sole shareholder.Which of the following statements is true?

• A)The distribution will not be a dividend because total earnings and profits is a negative $700.
• B)The distribution may be a dividend,depending on whether total earnings and profits at the date of the distribution is positive.
• C)The distribution will be a dividend because current earnings and profits is positive and exceeds the distribution.
• D)A distribution from a corporation to a shareholder is always a dividend,regardless of the balance in earnings and profits.

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Definitions:

Genetic Factors

Those hereditary qualities and genes inherited from parents that influence physical and behavioural characteristics.

Depression

A mood disorder that causes a persistent feeling of sadness and loss of interest, affecting how one feels, thinks, and handles daily activities.

Internal

Pertaining to or situated within something; inner, especially referring to processes or phenomena occurring within an entity or organism.

Stable

Referring to a condition or situation that is not undergoing significant change or variation and is steady or unchanging over time.