On January 1, 2026, Maria was the sole shareholder of Zenith Corp., a calendar-year C corporation. Maria's basis in her Zenith stock was $40,000. At the beginning of 2026, Zenith had accumulated earnings and profits of $70,000. For the year ended December 31, 2026, Zenith had current earnings and profits of $20,000. On July 1, 2026, Zenith distributed $110,000 in cash to Maria. What is the tax consequence of the distribution to Maria?

$90,000 of dividend income, with the remaining $20,000 reducing her stock basis.

$110,000 of dividend income, with no effect on her stock basis.

$70,000 of dividend income, with the remaining $40,000 reducing her stock basis.

$90,000 of dividend income, with the remaining $20,000 reducing her stock basis.

$90,000 of dividend income, with the remaining $20,000 treated as a capital gain.

On May 1, Sterling Manufacturing sent a signed letter to Bristol Corp. offering to sell 1,000 custom-machined parts for $50,000, with delivery guaranteed by July 31. The offer stated it would remain open until May 15. On May 10, Bristol Corp. sent a reply letter stating, "We accept your offer for 1,000 parts at $50,000. However, we require delivery by July 15." Sterling received Bristol's letter on May 12 but did not respond. On May 16, Sterling sold the parts to another customer. Bristol asserts that a binding contract was formed. Which of the following statements correctly analyzes the legal status of this situation?

Bristol's reply on May 10 constituted a counteroffer, which terminated Sterling's original offer.

A valid contract was formed on May 10 because Bristol's acceptance was sent before the offer expired.

A valid contract was formed, but Sterling breached it by not responding to the modified delivery date.

No contract was formed because Sterling did not acknowledge receipt of Bristol's acceptance by the May 15 deadline.

30 days before or after October 15

180 days before or after October 15

30 days before or after October 15

60 days before or after October 15

An S corporation tax election form

A securities registration statement

A general partnership agreement

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CPA REG (Taxation & Regulation) 10-Question Diagnostic

~10 minutes· Question 1 of 10· 12-Week Plan PDF

REG-ITopic: IRS audit process