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Jennifer owns 1,000 shares of Ernie Company. Her adjusted basis in the shares is $100,000. Ernie Company has no earnings and profits. It made a cash distribution to its shareholders, of which Jennifer received $60,000. The result of this distribution to Jennifer is:

a. Jennifer must recognize a $40,000 loss and has a zero basis in the stock

b. Jennifer must recognize $60,000 dividend income and her basis in the stock does not change

c. Jennifer has no recognized gain or loss and her basis in the shares is reduced to $40,000

d. None of the above

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