Which of the following is (are) reasons why an individual shareholder would prefer a distribution from a closely held corporation to be classified as a redemption rather than a dividend?

Group of answer choices

A. The corporation cannot take a deduction for a distribution classified as a dividend whereas a redemption is tax deductible by the corporation.

B. In a redemption the shareholders recover their basis in their stock which reduces the amount of income the shareholder must report as a result of the redemption. Generally, in a dividend, the shareholder does not recover stock basis when E&P exceed the amount of the distribution.

C. A redemption qualifies for capital gain treatment whereas dividends are taxed as ordinary income.

D. All of the above are correct reasons to prefer redemption treatment over a dividend.

E. Only B & C above are correct reasons to prefer redemption treatment over a dividend.