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Exit Corporation has accumulated E&P of $24,000 at the
beginning of the

           
current tax year. Current E&P is $20,000. During the year the
corporation

           
makes the following distributions to its sole shareholder who has
a

           
$22,000 basis for her stock.
 

Date                                  
Amount Distributed
April
1                                         
$20,000
June
1                                        
  20,000
August
1                                    
  15,000
November
1                               
    5,000
 
The treatment of the $15,000 August 1 distribution would be
A) $15,000 is taxable as a dividend; $5,000 from current E&P
and the balance from accumulated E&P
B) $15,000 is taxable as a dividend from accumulated E&P
C) $4,000 is taxable as a dividend from accumulated E&P, and
$11,000 is tax-free as a return of capital
D) $5,000 is taxable as a dividend from current E&P and
$10,000 is tax-free as a return of capital

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