Chance Corporation Has a $20,000 Deficit in Earnings and Profits

Multiple Choice

Chance Corporation has a $20,000 deficit in earnings and profits as of January 1, 2018. During 2018, the corporation has current earnings and profits of $40,000 and makes a $70,000 cash distribution to its shareholders. What part of the distribution is taxable as dividend income to Chance's shareholders?

A) $- 0 -
B) $20,000
C) $30,000
D) $40,000
E) $70,000