Mulberry Corporation has an August 31 year-end. Mulberry had $50,000 in accumulated E & P at the beginning of its 2011 fiscal year and during the year, it incurred a $75,000 operating loss. It also distributed $65,000 to its sole shareholder, Charles, on November 30, 2010. If Charles is a calendar year taxpayer, how should he treat the distribution when he files his 2010 income tax return ?The distribution has no effect on Charles in the current year.
- $50,000 of dividend income and $15,000 recovery of capital.
- $60,000 of dividend income and $5,000 recovery of capital.
- $65,000 of dividend income.