Bruin Company reports current E&P of $250,000 in 20X3 and accumulated E&P at the beginning of the year of $125,000. Bruin distributed $450,000 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 $450,000 exceeds the current year E&P of $250,000, therefore the excess of $200,000 is treated as a return of capital. The remaining $250,000 is treated as a dividend. Therefore, the distribution treated as a dividend in 20X3 is $250,000.

Bruin Company Reports Current E&P of $250,000 in 20X3 and Accumulated