Caesar owns 100% of Roman Company and his basis in its stock is $35,000. He receives cash of $10,000 and property with FMV of $30,000 and basis of $50,000 in complete liquidation of his ownership interest. As a result of this transaction, which of the following statements is incorrect?
A. Caesar has a nontaxable return of capital of $35,000.
B. Caesar reports a capital gain of $5,000.
C. Roman Company records a loss of $20,000.
D. Caesar reports dividend income of $40,000.
Answer: C
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