Purr Cat Food, Inc. has earnings and profits of $50,000 and acquires Wag Dog Food, Inc. in a legal merger that qualifies as an A reorganization. Wag Dog Food, Inc. has earnings and profits of $40,000. Soon after the merger, Purr Cat Food, Inc. distributes $60,000 to its shareholders, old and new. The amount of the distribution taxable as a dividend is

a. $40,000.

b. $50,000.

c. $60,000.

d. The old shareholders in Wag Dog Food, Inc. have dividends up to $40,000 but the old Purr Cat Food, Inc. shareholders have none.