Major Accomplishments Corp., a Delaware corporation, has 500,000 shares that are issued and outstanding. Major Accomplishments Corp. had a banner year in 2023, earning $1 million in profits. To reward shareholders, the Major Accomplishments Corp. board of directors declared and paid a $1 dividend per share to each of its shareholders.

Minor Successes Inc., a corporation organized in Vermont, owns 5,000 shares of Major Accomplishments Corp. and receives a dividend of $5,000. What is the U.S. tax consequence to Minor Successes on the dividend from Major Accomplishments?

1. The entire distribution is subject to U.S. tax
2. 30% of the distribution is subject to U.S. tax
3. 50% of the distribution is subject to U.S. tax
4. None of the distribution is subject to U.S. tax