Buchannan Corporation has a deficit in accumulated E & P of $300,000 and has current E & P of $225,000. On July 1, Buchannan distributes $250,000 to its sole shareholder, Sam, who has a basis in his stock of $50,000. As a result of the distribution, Sam has:

Select one:

A. Dividend income of $225,000 and reduces his stock basis to $27,500.

B. Dividend income of $225,000 and reduces his stock basis to $25,000.

C. Dividend income of $225,000 and no adjustment to stock basis.

D. No dividend income, reduces his stock basis to zero, and has a capital gain of $250,000.

E. None of the above.