Carlota owns 4% of Express Corporation and has a basis of $5,000 in her stock. During the year, Express distributes a $300,000 dividend. As a result of the dividend, Carlota has
A)$12,000 of dividend income.
B)$5,000 of dividend income and $7,000 of capital gain.
C)$7,000 of dividend income and a $5,000 tax-free return of capital.
D)$5,000 of dividend income, $5,000 tax-free return of capital, and a $2,000 capital gain.
E)$7,000 capital gain.

Question

Quizplus · Accepted Answer

Carlota's share of the $300,000 dividend, based on her 4% ownership, is $12,000 (4% of $300,000). This amount is considered dividend income to her.

Carlota Owns 4% of Express Corporation and Has a Basis