Bob Corporation ended last year with a positive $10,000 accumulated E&P. However, this year things did not go so well and Bib Corporation lost money and had a deficit in E&P for the year of $9,000. Bob wants to give its sole shareholder a distribution of $1,000 on December 31. That shareholder has a basis of $3,000 in his stock. If Bob makes this distribution, will the distribution be considered a dividend to the shareholder even though the corporation had to report a loss for that year?

Answer rating: 100% (QA)

Dividends are declared and paid from the free reserves of the company ... View the full answer