Bruin Company reports current E&P of $200,000 in 20X3 and accumulated E&P at the beginning of the year of $100,000. Bruin distributed $400,000 to its sole shareholder on January 1, 20X3. How much of the distribution is treated as a dividend in 20X3?

Question

Quizplus · Accepted Answer

The distribution of $400,000 exceeds the current E&P of $200,000. Therefore, $200,000 is treated as a dividend and $200,000 is treated as a return of capital. The accumulated E&P at the beginning of the year is irrelevant for calculating the dividend amount.

Bruin Company Reports Current E&P of $200,000 in 20X3 and Accumulated