9. Which of the following statements best describes the priority of the tax trea
ID: 2478796 • Letter: 9
Question
9. Which of the following statements best describes the priority of the tax treatment of a distribution from a corporation to a shareholder?
A. The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock.
B. The distribution is a return of capital, then a dividend to the extent of the corporation's earnings and profits, and finally gain from sale of stock.
C. The distribution is a return of capital, then gain from sale of stock, and finally a dividend to the extent of the corporation's earnings and profits.
D. The shareholder can elect to treat the distribution as either a dividend to the extent of the corporation's earnings and profits or a return of capital, followed by gain from sale of stock
Explanation / Answer
A. The distribution is a dividend to the extent of the corporation's earnings and profits, then a return of capital, and finally gain from sale of stock.
For a shareholder it starts from tax treatment starts from Dividend received from corporation than it os return on capiatl and when finally he sales the stock and the gains are taxable.