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On January 1, 2010, Kinney Inc., an electing S corporation, has $4000 of AEP and...

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Accounting

On January 1, 2010, Kinney Inc., an electing S corporation, has $4000 of AEP and a balance of $10,000 in AAA. Kinney has two shareholders, Erin and Maine, each of whom owns 500 shares pf Kinney's stock. Kinney's 2010 taxable income is $5000. Kinney distributes $6000 to each shareholder on Feb. 1. 2010, and distributes another $3000 to each shareholder on September 1. How is Erin taxed on this distribution?

a. $500 dividend income

b. $1000 dividend income

c. $1500 dividend income

d. $3000 dividend income

e. None of the above

Please show the work.

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