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:

Sexual Health

A state of physical, emotional, mental, and social well-being related to sexuality, including the absence of disease and the understanding of sexual rights.

Personal Biases

The predispositions or inclinations, often unconscious, that affect one's judgments and perceptions of other people and situations.

Erectile Dysfunction

A medical condition in which a man is unable to achieve or maintain an erection sufficient for satisfactory sexual performance.

Erection

The physiological phenomenon of the penis becoming enlarged and firm, primarily in response to sexual arousal.