Magenta Corporation is a calendar year corporation. Magenta Corporation had $25,000 in Accumulated Earnings and Profits (AE&P)

Question:

Magenta is a calendar year Magenta had $25,000 in Accumulated Earnings and Profits (AE&P) at the beginning of the current year. For the current tax year, Magenta had a Deficit in its Current Earnings and Profits (CE&P) of ($45,000) (before any distributions). Magenta also distributed $60,000 to its sole shareholder, Chuck, on November 30 of the current year. As a result of the which of the following is the correct regarding how Chuck should treat the for the current year?
(a) $60,000 of Income
(b) $35,000 of Income and $25,000 (Tax-Free) Recovery Of Capital.
(c) $45,000 Of Income and $15,000 (Tax-Free) Recovery Of Capital.
(d) The has no effect on Chuck in the current year

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