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22 July, 07:47

A corporation had $10,000, of earnings and profits (E&P) for the current year and accumulated negative E&P of $100,000. It paid a cash distribution of $30,000. What amount represents the taxable dividend to the shareholder for that year?

a. $100,000

b. $30,000

c. $10,000

d.$0

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Answers (1)
  1. 22 July, 09:02
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    c. $10,000.

    Explanation:

    The profit of the company is $10,000 which is taxable dividend income. The company's E&P accumulate is negative. Dividends are paid out from current or accumulated earning and profits of the company. The company had only $10,000 earnings in the current earning and profits account which will be taxable dividend income.
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