A calendar-year corporation has positive current E&P of $500 and a deficit in accumulated E&P of ($1,200).
Question:
A calendar-year corporation has positive current E&P of $500 and a deficit in accumulated E&P of ($1,200). The corporation makes a $400 distribution to its sole shareholder. Which of the following statements is true?
A) The distribution will not be a dividend because total E&P is a deficit.
B) The distribution may be a dividend, depending on whether net E&P (current plus accumulated E&P) at the date of the distribution is positive.
C) The distribution will be a dividend because current E&P is positive and exceeds the distribution.
D) A distribution from a corporation to a shareholder is always a dividend, regardless of the balance in E&P.
Essentials of Federal Taxation 2019
ISBN: 9781260190045
10th edition
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver