What is the tax treatment of the distribution to barney

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Question - For the year 20X3 Elk Company reports a deficit in current E&P of ($200,000) and positive accumulated E&P of $300,000 at the beginning of the year. Elk distributed $200,000 to its sole shareholder, Barney Rubble, on December 31, 20X3. Barney's tax basis in his Elk stock is $75,000. What is the tax treatment of the distribution to Barney, and what is his tax basis in Elk stock after the distribution?

1. Dividend income?

2. Return of capital?

3. Capital gain?

4. Stock basis?

Reference no: EM133153275

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