Adam owns 100% of Banana Company and has a basis of $60,000 in its stock. The company has earnings and profits of $54,000 and distributes a cash dividend to Adam of $72,000. Adam has a:
A. Dividend of $72,000.
B. Nontaxable distribution of $18,000.
C. Capital gain of $12,000.
D. Nontaxable distribution of $6,000.
Answer: B
Business
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