Renee, the sole shareholder of Indigo Corporation, sold her stock to Chad on July 1 for $180,000. Renee’s stock basis at the beginning of the year was $120,000. Indigo made a $60,000 cash distribution to Renee immediately before the sale and Chad received a $120,000 cash distribution from Indigo on November 1. As of the beginning of the current year, Indigo had $26,000 in accumulated E & P and current E & P (before distributions) was $90,000. Which of the following statements is correct?
A. Renee recognizes a $60,000 gain on the sale of the stock.
B. Renee recognizes a $64,000 gain on the sale of the stock.
C. Chad recognizes dividend income of $120,000.
D. Chad recognizes dividend income of $30,000.
E. None of these.
Answer: A
Business
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