Blue Corporation has a deficit in accumulated E & P of $$300,000$ and has current E & P of $$150,000.$ On July $1,$ Blue distributes $$185,000$ to its sole shareholder, Sam, who has a basis in his stock of $$52,500.$ As a result of the distribution, Sam has:

a$.$

Dividend income of $$150,000$ and reduces his stock basis to $$17,500.$

b$.$

Dividend income of $$52,500$ and reduces his stock basis to zero.

c$.$

Dividend income of $$150,000$ and no adjustment to stock basis.

d$.$

No dividend income, reduces his stock basis to zero, and has a capital gain of $$185,000.$