Describe the effect of a $125,000 cash distribution paid on January 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has the following scenarios: (Click the icon to view the scenarios.) Answer Parts a through d again, assuming instead that the corporation makes the distribution on October 1 in a nonleap year. a. Describe the effect of a $125,000 cash distribution paid on January 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has $125,000 of current E&P and $125,000 of accumulated E&P. O A. The distribution is a $125,000 dividend payable out of current E&P. OB. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. The remaining $109,000 is ordinary income. OC. The dividend is a $125,000 dividend payable out of accumulated E&P. OD. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. The remaining $109,000 is a capital gain. b. Describe the effect of a $125,000 cash distribution paid on January 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has a $46,000 accumulated E&P deficit and a $66,000 current E&P balance. O A. First, $66,000 of the distribution is a dividend from current E&P. Second, 516,000 is a return of capital that reduces the shareholder's stock basis to zero. Third, the remaining $43,000 is a capital gain. The $46,000 accumulated E&P deficit remains. OB. First $ 16,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, $109,000 of the distribution is ordinary income from current E&P. The $46,000 accumulated E&P deficit remains O C. First, $43,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, 566,000 of the distribution is ordinary income from current E&P. Third, the remaining S16,000 is a capital gain. The $46.000 accumulated E&P deficit remains OD. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, 566,000 of the distribution is ordinary income from current E&P. Third, the remaining S43,000 is a capital gain. The $46,000 accumulated E&P deficit remains. c. Describe the effect of a $125,000 cash distribution paid on January 1 to the sole shareholder of a calendar year corporation whose stock basis is 516,000 when the corporation has a $65,000 accumulated E&P deficit and a $65,000 current E&P deficit. O A. First, $16,000 of the distribution is a return of capital that reduces the shareholder's stock basis to zero. Second, the remaining $109,000 is a capital gain. A $130,000 accumulated E&P deficit remains. OB. First, $16,000 of the distribution is a return of capital that reduces the shareholder's stock basis to zero. Second, 549,000 is a capital gain. A $65,000 accumulated E&P deficit remains. O C. First, $16,000 is a capital loss. The remaining $109,000 is ordinary income. OD. The distribution is a $125,000 dividend payable out of accumulated E&P. d. Describe the effect of a $125,000 cash distribution paid on January 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has an $65,000 current E&P deficit and a $125,000 accumulated E&P balance. O A. The distribution is a $125,000 dividend payable out of accumulated E&P. None of the current E&P deficit reduces accumulated E&P since the distribution is made on January 1. OB. First, $65,000 of the distribution is a dividend payable out of accumulated E&P. The remaining $60,000 reduces current E&P. O C. The distribution is a $125,000 dividend payable out of accumulated E&P. The current E&P deficit reduces accumulated E&P. OD. First, 565,000 of the distribution is a dividend payable out of accumulated E&P. The remaining $60,000 is a return of capital. Answer Parts a through d again, assuming instead that the corporation makes the distribution on October 1 in a nonleap year. a. Describe the effect of a $125,000 cash distribution paid on October 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has $125,000 of current E&P and $125,000 of accumulated E&P. O A. The distribution is a $125,000 dividend payable out of current E&P. OB. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. The remaining $109.000 is a capital gain. O C. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. The remaining $109,000 is ordinary income OD. The dividend is a $125,000 dividend payable out of accumulated E&P. b. Describe the effect of a $125,000 cash distribution paid on October 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has a $46,000 accumulated E&P deficit and a $66,000 current E&P balance. O A. First, 543,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, 566,000 of the distribution is ordinary income from current E&P. Third, the remaining S16,000 is a capital gain. The $46,000 accumulated E&P deficit remains O B. First, $66,000 of the distribution a dividend from current E&P. Second, 516,000 is a return of capital that reduces the shareholder's stock basis to zero. Third, the remaining $43,000 is a capital gain. The $46,000 accumulated E&P deficit remains. O C. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, $66,000 of the distribution is ordinary income from current E&P. Third, the remaining $43,000 is a capital gain. The $46,000 accumulated E&P deficit remains. OD. First, $16,000 is a return of capital that reduces the shareholder's stock basis to zero. Second, $109,000 of the distribution is ordinary income from current E&P. The $46,000 accumulated E&P deficit remains. c. Describe the effect of a $125,000 cash distribution paid on October 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has a $65,000 accumulated E&P deficit and a $65.000 current E&P deficit. O A. The distribution is a $125,000 dividend payable out of accumulated E&P. OB. First, $16,000 is a capital loss. The remaining $109,000 is ordinary income. O C. First, $16,000 of the distribution is a return of capital that reduces the shareholder's stock basis to zero. Second, the remaining $109,000 is a capital gain. A $130,000 accumulated E&P deficit remains. OD. First, $16,000 of the distribution is a return of capital that reduces the shareholder's stock basis to zero. Second, 549,000 is a capital gain. A $65,000 accumulated E&P deficit remains. d. Describe the effect of a $125,000 cash distribution paid on October 1 to the sole shareholder of a calendar year corporation whose stock basis is $16,000 when the corporation has an $65,000 current E&P deficit and a $125,000 accumulated E&P balance. (Do not round intermediary calculations. Only round your final answer to the nearest dollar.) O A. The distribution is a $125,000 dividend payable out of accumulated E&P. None of the current E&P deficit reduces accumulated E&P since the distribution is made on October 1. O B. First, 565,000 of the distribution is a dividend payable out of accumulated E&P. The remaining 560,000 reduces current E&P. O C. Accumulated E&P as of October 1 is $76,384 so that $76,384 of the distribution is a dividend. Allocation of the current E&P deficit to the pre-October 1 period is accomplished by multiplying $65,000 times 273/365. Of the remaining 548,616, $16,000 is a return of capital that reduces the shareholder's stock basis to zero, and the remaining $32,616 is a capital gain. OD. The distribution is a $125,000 dividend payable out of accumulated E&P. The current E&P deficit reduces accumulated E&P