In the current year, Boone inherited 100% of Cane Corporation's outstanding stock from his mother. The stock had a fair market value of $500,000 at the date of death and was reflected on Cane's balance sheet as follows: Cash $500,000 Capital stock 300,000 Accumulated earnings & profits 200,000 Boone immediately withdrew $100,000 out of Cane Corporation as a dividend distribution. Later in the year, pursuant to a plan of liquidation, Boone withdrew the remaining $400,000 out of Cane. For the current year, how much will Boone be required to report as ordinary dividend income and capital gain or loss?Ordinary Dividend Capital Gain or Loss   A. $200,000 $200,000   B. $0            $0              C. $100,000 $100,000   D. $100,000 $500,000

SWFT Comprehensive Volume 2019
42nd Edition
ISBN:9780357233306
Author:Maloney
Publisher:Maloney
Chapter22: S Corporations
Section: Chapter Questions
Problem 27P
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In the current year, Boone inherited 100% of Cane Corporation's outstanding stock from his mother. The stock had a fair market value of $500,000 at the date of death and was reflected on Cane's balance sheet as follows:

Cash

$500,000

Capital stock

300,000

Accumulated earnings & profits

200,000

  • Boone immediately withdrew $100,000 out of Cane Corporation as a dividend distribution. Later in the year, pursuant to a plan of liquidation, Boone withdrew the remaining $400,000 out of Cane. For the current year, how much will Boone be required to report as ordinary dividend income and capital gain or loss?Ordinary Dividend
  • Capital Gain or Loss
  •  
  • A.
  • $200,000
  • $200,000
  •  
  • B.
  • $0           
  • $0           
  •  
  • C.
  • $100,000
  • $100,000
  •  
  • D.
  • $100,000
  • $500,000
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