Oreo Corporation has AEP of $5,000 and negative CEP of $18,000. The corporation distributes $11,000 on March 1 to Morris, its sole shareholder, who has a $9,000 basis for his stock which he has held for 6 years. The treatment of the distribution will be

Select one:

a.

$2,000 dividend and a $9,000 capital gain.

b.

$500 dividend, $9,000 tax free return of stock basis and $1,500 long-term capital gain.

c.

$2,000 dividend and a $9,000 tax free return of basis.

d.

$8,000 dividend and a $3,000 return of capital.

e.

None of the above.