Viking Corporation is owned equally by Sven and his wife, Olga, each of whom holds 130 shares in the company. Viking redeemed 65 shares of Sven's stock for $2,100 per share on December 31, 20X3. Viking has total E&P of $600,000. What are the tax consequences to Viking because of the stock redemption?

Question

Quizplus · Accepted Answer

The tax consequences to Viking because of the stock redemption include a reduction in E&P. The amount of the reduction is calculated by multiplying the number of shares redeemed (65) by the redemption price per share ($2,100), resulting in a total of $136,500. This amount is subtracted from Viking's E&P.

Viking Corporation Is Owned Equally by Sven and His Wife