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 are positive and exceed the distribution.
D) A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in earnings and profits.
Correct Answer:
Verified
Correct Answer:
Verified
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