Chunky Cat, a cat toy manufacture, is organized as an S corporation but it used to be a C corporation four years ago when the selection was made. During its S years, Chunky had accumulated E&P of $200,000 which is still the current balance. Currently, Chunky's AAA is $80,000. Chunky has two shareholders, Shareholder M, who owns 60% of the outstanding shares and Shareholder N who owns the remaining 40% of the outstanding shares. M's basis in Chunky stock is $35,000 and N's basis is $30,000. If Chunky makes a cash distribution of $90,000 to both shareholders, which of the following statements is FALSE? Multiple Choice M receives a $48,000 tax free distribution and a $6,000 dividend distribution N receives a $32,000 tax free distribution and a $4,000 dividend distribution M receives a $40,000 tax free distribution and a $5,000 dividend distribution All of the statements are false