Viking Corporation is owned equally by Sven and his wife, Olga, each of whom hold 100 shares in the company.Viking redeemed 75 shares of Sven's stock for $2,000 per share on December 31, year 1.Viking has total (current plus accumulated)E&P of $500,000.What are the tax consequences to Viking as a result of the stock redemption?

Question

Quizplus · Accepted Answer

The tax consequences to Viking as a result of the stock redemption include a reduction in E&P by the amount paid for the stock redemption ($2,000 per share for 75 shares equals $150,000). This reduction reflects the outflow of corporate resources to redeem the stock.

Viking Corporation Is Owned Equally by Sven and His Wife