At a time when Blackbird Corporation had E & P of $600,000 and 1,000 shares of stock outstanding,the corporation distributed $200,000 to redeem 200 shares of its stock.The transaction qualified as a disproportionate redemption for the shareholder.Blackbird's E & P is reduced by $120,000 as a result of the distribution.

Question

Quizplus · Accepted Answer

The reduction in Blackbird's E & P is the lesser of (1)the amount of the distribution ($200,000),or (2)the same percentage of E & P as the percentage of stock redeemed (20% F1F1F1S1F1F1F10 $600,000 = $120,000).

At a Time When Blackbird Corporation Had E & P