Viking Corporation is owned equally by Sven and his wife, Olga, each of whom holds 125 shares in the company. Viking redeemed 80 shares of Sven's stock for $1,700 per share on December 31, 20X3. Viking has total E&P of $470,000. 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 reduction is calculated as the number of shares redeemed (80) multiplied by the redemption price per share ($1,700), which equals $136,000 (80 shares * $1,700/share = $136,000). This amount is subtracted from Viking's E&P.

Viking Corporation Is Owned Equally by Sven and His Wife