Corporation Z has an accumulated deficit of $100 in E&P as of December 31 of the preceding year. In addition, corporation Z is operating at a loss for the current year. Z has a valuable asset which if sold will generate a gain sufficient to eliminate the current year's deficit in E&P and cause there to be positive earnings and profits. Rather than sell the asset in the current year and distribute the proceeds to shareholders as a dividend, Z borrows against the asset and distributes the loan funds to the shareholders. In the following year, Z sells the asset and pays off the loan. a. There is a dividend in the current year because the borrowing and the delaying of the sale is a sham. b. The distribution will be a return of capital and potential gain to shareholders. c. a and b. d. None of the above. QUESTION 20 Corporation Z distributes $200 total in cash to shareholder and $200 total in cash to shareholder D during the current year at quarterly intervals, $50 in cash per quarter per shareholder. At the end of the preceding taxable year Z's accumulated E&P was $0. In the current taxable year, Z's taxable income and current E&P is $200. a. The first two quarterly installments of $50 to each shareholder are dividends. b. $25 of each quarterly distribution is a dividend to each shareholder Inc. There are no dividends to either shareholder. d. None of the above