Tangelo Corporation Has an August 31 Year-End

Tangelo Corporation has an August 31 year-end. Tangelo had $50,000 in accumulated E & P at the beginning of its 2017 fiscal year (September 1, 2016) and during the year, it incurred a $75,000 operating loss. It also distributed $65,000 to its sole shareholder, Cass, on November 30, 2016. If Cass is a calendar year taxpayer, how should she treat the distribution when she files her 2016 income tax return (assuming the return is filed by April 15, 2017) ?

A) $65,000 of dividend income.
B) $60,000 of dividend income and $5,000 recovery of capital.
C) $50,000 of dividend income and $15,000 recovery of capital.
D) The distribution has no effect on Cass in the current year.
E) None of the above.