The Polaris S Corporation Has Operating Income of $50,000

Multiple Choice

The Polaris S Corporation has operating income of $50,000. Andrew is the sole shareholder of the corporation that has had the S election in effect since its inception. At the beginning of the current year, Andrew's basis in his S corporation stock is $2,000. During the year Andrew receives cash distributions totaling $55,000. How much income must Andrew recognize for the current tax year?

A) $50,000 ordinary income; $55,000 dividend income.
B) $50,000 ordinary income.
C) $50,000 ordinary income; $3,000 capital gain.
D) $55,000 dividend income; $3,000 capital gain.
E) $55,000 dividend income.