Green Corporation has negative current earnings and profits of ($100,000) and positive accumulated earnings and profits of $250,000. A $50,000 distribution from Green to its sole shareholder will be treated as a dividend because total earnings and profits is a positive $150,000.

Question

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According to the given information, Green Corporation has negative current earnings and profits of ($100,000) but positive accumulated earnings and profits of $250,000. To determine whether a distribution will be treated as a dividend, the total earnings and profits of the corporation at the time of distribution need to be considered. In this case, the total earnings and profits of Green Corporation is $150,000 (positive accumulated earnings and profits of $250,000 - negative current earnings and profits of ($100,000) ), which means that the $50,000 distribution to the sole shareholder will be treated as a dividend. Therefore, the statement "A $50,000 distribution from Green to its sole shareholder will be treated as a dividend because total earnings and profits is a positive $150,000" is true.

Green Corporation Has Negative Current Earnings and Profits of ($100,000)