Falcon Corporation has $200,000 of current E & P and a deficit in accumulated E & P of $90,000. If Swan pays a $300,000 distribution to its shareholders on July 1, how much dividend income do the shareholders report?
A) $0.
B) $10,000.
C) $110,000.
D) $200,000.
E) None of the above.

Question

Quizplus · Accepted Answer

The dividend income reported by shareholders is limited to the current E&P of $200,000, as the distribution cannot exceed the current E&P when there is a deficit in accumulated E&P.

Falcon Corporation Has $200,000 of Current E & P and a Deficit