Carlota Owns 4% of Express Corporation and Has a Basis

Multiple Choice

Carlota owns 4% of Express Corporation and has a basis of $5,000 in her stock. During the year, Express distributes a $300,000 dividend. As a result of the dividend, Carlota has

A) $12,000 of dividend income.
B) $5,000 of dividend income and $7,000 of capital gain.
C) $7,000 of dividend income and a $5,000 tax-free return of capital.
D) $5,000 of dividend income, $5,000 tax-free return of capital, and a $2,000 capital gain.
E) $7,000 capital gain.