Question

As of January 1, Cassowary Corporation has a deficit in accumulated E & P of $100,000. For the tax year, current E & P (accrued ratably) is $240,000 (prior to any distributions). On July 1, Cassowary Corporation distributes $275,000 to its sole shareholder. The amount of the distribution that is a dividend is:

Answer 1

The amount of the distribution that is a dividend is $140,000

Step-by-step explanation:

Logic Distribution is taxed only upto the amount of E&P prior to distributions available with the corporation.