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If a corporation makes a pro-rata cash distribution that exceeds both current and accumulated E&P...

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Accounting

If a corporation makes a pro-rata cash distribution that exceeds both current and accumulated E&P and the distribution is NOT associated with a stock redemption, how will the distribution be treated for tax purposes once the distributed amounts exceed current and accumulated E&P?

a. First treated as ordinary income and then as capital income.

b. First taxed at 15% for capital gains and then taxed at ordinary income rates.

c. First treated as a return on capital, then as capital gains.

d. None of the above.

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