How much of nygmas distribution will be taxed as a dividend

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Problem

Cobblepot and Nygma founded the Iceberg Lounge, Inc. as equal shareholders (Nygma is the lounge act). At the end of the year, each receives a cash distribution of $500,000. Iceberg's current year taxable income is $1 million and it has no accumulated E & P. (Riddler's act isn't very good). Two years ago, Iceberg sold air conditioning equipment to Mr. Freeze for $1,200,000 (basis of $400,000). Payment for one-half of the sale of the asset was made last year, the balance this year--in cold cash. How much of Nygma's distribution will be taxed as a dividend?

a. $0
b. $300,000
c. $500,000
d. $600,000
e. None of the above.

Reference no: EM131794266

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