Q Inc. is owned by L and R. Q Inc. is an S corporation, but in prior years it was a regular corporation and it has a remaining E&P balance from those prior years of $60,000. The corporations AAA balance at the beginning of the year was $35,000, and it reported taxable income of $42,000. At the beginning of the year, L's tax basis in her Q Inc. stock was $25,000. R's tax basis in his Q Inc. stock (also at the beginning of the year) was only $10,000. The corporation distributed $100,000 to its two shareholders this year ($50,000 each). What portion of the distribution will be taxable to the shareholders as dividend income?

a. $77,000

b.

$75,000

c.

$23,000

d.

$25,000