Albatross Corporation has a deficit in accumulated E & P of $600,000 to its sole shareholder, Eugene, who has a basis in his stock of $105,000. As a result of the distribution, Eugene has:

A. Dividend income of $450,000 and reduces his stock basis to $55,000.

B. No dividend income reduces his stock basis to zero and has a capital gain of $500,000.

C. Dividend income of $105,000 and reduces his stock basis to zero.

D. None of the choices.

E. Dividend income of $450,000 and no adjustment to stock basis.

Please show works.