Taxpayer owns all of the stock in X Corp. The board of directors of X Corp. declares a cash dividend on 01-01-X1 of $10,000, for shareholders of record as of 01-15-X1 and payable 01-31-X1. Both Taxpayer and Donee are cash basis taxpayers. Taxpayer gifted the stock to Donee on 01-08-X1. Under the Caruth case, which of the following is true?