Jerry is the sole shareholder of Bluejay Corporation,a calendar year C corporation.As of January 1,2016,Bluejay has a deficit of $50,000 in accumulated E & P.During 2016,it has current E & P of $300,000 and distributes a cash dividend of $400,000 to its shareholder.As of January 1,2016,Jerry's basis in the Bluejay stock is $75,000.One result of these transactions is:

Question

Quizplus · Accepted Answer

Since Bluejay had current E&P of $300,000 and distributed $400,000 to Jerry as a cash dividend, Jerry will have dividend income of $300,000. The fact that Bluejay started the year with a deficit in accumulated E&P of $50,000 and ended the year with a deficit in accumulated E&P of $150,000 is irrelevant for calculating Jerry's dividend income.

Jerry Is the Sole Shareholder of Bluejay Corporation,a Calendar Year