Total Corporation Has Earned $75,000 Current E&P and Has an Accumulated

Total Corporation has earned $75,000 current E&P and has an accumulated E&P deficit from prior year of $25,000. The corporation pays a $100,000 distribution to shareholders. Shareholders of the corporation have a total stock basis of $40,000. The tax results of the distributions to the shareholders will be

A) dividend income of $75,000 and tax- free return of capital of $25,000.
B) dividend income of $60,000 and tax- free return of capital of $40,000.
C) dividend income of $50,000, tax- free return of capital of $40,000 and capital gain of $10,000.
D) dividend income of $100,000.