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What is the character of the distribution for shareholder b

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Question - A corporation declares a 15% stock distribution. The shareholders have a choice between the stock or $150 in cash per each share. The fair market value (FMV) of the stock is $160 per share. Shareholder A owns 600 shares and has a basis in the stock of $33,000. Shareholder B owns 400 shares and has a basis in the stock of $36,000. The corporation has $30,000 of earnings and profits (E&P). What is the character of the distribution for Shareholder B if both shareholders elect to receive cash?

A. $13,500 capital gains

B. $13,500 dividend income

C. $14,400 capital gains

D. $14,400 dividend income

Reference no: EM133185908

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