ABC Corp. has two classes of stock issued and outstanding -

• common stock, and
• nonvoting preferred stock.

Both the common and the preferred stock are traded on the New York Stock Exchange. (The exact number of shares of either class is not relevant to the present issue.)

ABC's board of directors authorized the payment of the following cash dividends during 2019:

Common Stock

January 2$5M

April 1$5M

July 1$5M

October 1$5M

Preferred Stock

March 15$150M

June 15$155M

September 15$160M

December 15$165M

ABC had accumulated E&P of $2B as of January 1, 2019.

On or about October 10, 2019, ABC realized an ordinary loss of approximately $6B, This loss was also recognized on the 2019 tax return.

ABC is a calendar year corporation.

As a result of recognizing this loss, ABC experienced a deficit in current (2019) E&P of $4B.

Issue

How much or which, if any, of ABC's 2019 dividends should have been reported to shareholders as "ordinary dividends" (Form 1099-DIV, Box 1a), and how much or which, if any, should have been reported to shareholders as "Nondividend distributions" (Form 1099-DIV, Box 3)? Explain your analysis and support your conclusions.[1]

[1] Do not quote or cite your textbook; it is not "authority."