Mulberry Corporation Has an August 31 Year-End

Mulberry Corporation has an August 31 year-end.Mulberry had $50,000 in accumulated E & P at the beginning of its 2011 fiscal year (September 1,2010) and during the year,it incurred a $75,000 operating loss.It also distributed $65,000 to its sole shareholder,Charles,on November 30,2010.If Charles is a calendar year taxpayer,how should he treat the distribution when he files his 2010 income tax return (assuming the return is filed by April 15,2011) ?

A) The distribution has no effect on Charles in the current year.
B) $50,000 of dividend income and $15,000 recovery of capital.
C) $60,000 of dividend income and $5,000 recovery of capital.
D) $65,000 of dividend income.
E) None of the above.