Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A distribution from earnings and profits is a dividend. Distributions in excess of earnings and profits are considered a return of capital and are not taxable until the stockholder's basis has been fully recovered. Distributions of appreciated property generate a taxable gain to the distributing corporation, not to the stockholder recipient. Earnings and profits are not exactly the same as retained earnings, as retained earnings can also include profits that have been reinvested back into the company instead of being distributed to stockholders.

Which of the Following Statements Is Correct