Required information

Sam, Dean, Bobby and Cass are the shareholders of a C-corporation named Winchester 4'Ever, Inc.

Throughout the current tax year (payment dates provided below), Winchester distributed $70,000 cash to its shareholders (25% to each shareholder):

February 1 - $15,000

May 31 - $15,000

November 30 - $20,000

December 31 - $20,000

The beginning stock basis for each shareholder was as follows:

Sam - $11,000

Dean - $3,000

Bobby - $35,000

Cass - $0

If Winchester's accumulated E&P at the beginning of the year is negative and current E&P is less than $70,000, which shareholder will definitely have to characterize a portion of their distribution as a capital gain?

Multiple Choice

A.Dean

B.Bobby

C.Cass

D.Sam