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

Multiple Choice

A calendar-year corporation has positive current E&P of $500 and a deficit in accumulated 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 E&P is a deficit.
B) The distribution may be a dividend, depending on whethernet E&P (current plus accumulated E&P) at the date of the distribution is positive.
C) The distribution will be a dividend because current E&P is positive and exceeds the distribution.
D) A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in E&P.