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7 May, 22:03

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:

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  1. 7 May, 22:40
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    The amount of the distribution that is a dividend is $140,000

    Explanation:

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