22Instructions : Choose the best multiple choice answer and explain why you chos

Question

22Instructions : Choose the best multiple choice answer and explain why you chose the answer. MUST provide 2-3 sentence brief explanation and show all work. All sources must be noted.

____   22.   Aml owns all of the stock of Light Corp. The current earnings and profits are $45,000. Am’s basis for his stock is $200,000. He receives a distribution of $250,000 on the last day of the tax year. How much dividend income and/or capital gain should Al report?

a.

$0.

b.

Dividend income of $35,000 and capital gain of $15,000.

c.

Dividend income of $45,000 and capital gain of $5,000.

d.

Dividend income of $0 and capital gain of $20,000.

e.

None of the above.

a.

$0.

b.

Dividend income of $35,000 and capital gain of $15,000.

c.

Dividend income of $45,000 and capital gain of $5,000.

d.

Dividend income of $0 and capital gain of $20,000.

e.

None of the above.

Explanation / Answer

ans) option (c) dividend income of $45000 and capital gain of $5000

current earnings and profita = 45000 dividend

capital gain = 250,000 -200,000 - 45000 = 5000 capital gain

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