1. Ally owns 25% of Raisman Corporation's single class of stock. Ally's basis in the stock is $12,000. Raisman's E&P is $32,000. If Raisman redeems all of Ally's stock for $28,000, Ally must report dividend income of

A) $40,000.

B) $30,000.

C) $20,000.

D) $0.

2.

Which of following generally does not indicate an unreasonable earnings accumulation?

A) planned expansion of business facilities

B) expenditure of corporate funds for the personal benefit of the shareholders

C) investments in properties or securities unrelated to the activities of the corporation

D) loans to shareholders