Fortnite, Inc. ("Fortnite") has $10,000 of current E&P in the current year and a $20,000 DEFICIT in accumulated E&P. On July 1 of the current year, Fortnite distributes $15,000 in cash to its sole shareholder, John Smith. Bart's basis in his Fortnite stock before the distribution is $3,000. John will recognize:

A. $0 dividend income, $3,000 return of basis, and $12,000 in capital gain

B. $15,000 in dividend income, 0 return of basis, and 0 capital gain

C. $5,000 in dividends, $3,000 return of basis, and a $7,000 capital gain

D. $10,000 in dividends, $3,000 return of basis, and $2,000 capital gain

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is D 10000 in divide... View the full answer