Identify which of the following statements is true.
A)If both the current and accumulated E&P have deficit balances, a corporate distribution cannot be characterized as a dividend.
B)The shareholder's basis in property received in a nonliquidating distribution is the property's FMV reduced by liabilities assumed by the shareholder.
C)A corporation recognizes gain when distributing money as a dividend to its shareholders.
D)All of the above are false.

Question

Quizplus · Accepted Answer

If both the current and accumulated Earnings and Profits (E&P) have deficit balances, a corporate distribution cannot be characterized as a dividend because dividends can only be paid out of positive E&P.

Identify Which of the Following Statements Is True