8. Assume a calendar-year corporation has a deficit in current E&P of ($100) and positive accumulated E&P

Question:

8. Assume a calendar-year corporation has a deficit in current E&P of ($100) and positive accumulated E&P of $100. Under this circumstance, a cash distribution of $100 to the corporation’s sole shareholder on June 30 will not be treated as a dividend because total E&P at December 31 is $0. True or false?
Explain.

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