As of January 1, Cassowary Corporation has a deficit in accumulated E & P of $100,000. For the tax year, current E & P (accrued ratably) is $240,000 (prior to any distributions). On July 1, Cassowary Corporation distributes $275,000 to its sole shareholder. The amount of the distribution that is a dividend is: $20,000 $140,000 $240,000 $275,000 Solution $140,000 .

1. As of January 1, Cassowary Corporation has a deficit in accumulated E & P of $100,000. For the
tax year, current E & P (accrued ratably) is $240,000 (prior to any distributions). On July 1,
Cassowary Corporation distributes $275,000 to its sole shareholder. The amount of the
distribution that is a dividend is:
$20,000
$140,000
$240,000
$275,000
$20,000
$140,000
$240,000
$275,000
Solution
$140,000