Longhorn Company reports current E&P of $105,000 in 20X3 and accumulated E&P at the beginning of the year of negative $210,000. Longhorn distributed $315,000 to its sole shareholder on January 1, 20X3. The shareholder's tax basis in his stock in Longhorn is $105,000. How is the distribution treated by the shareholder in 20X3?

A.$105,000 dividend, $105,000 tax-free return of basis, and $105,000 capital gain.

B.$105,000 dividend and $210,000 tax-free return of basis.

C.$105,000 dividend.

D. $0 dividend, $105,000 tax-free return of basis, and $210,000 capital gain.