Canary Corporation has 1,000 shares of stock outstanding.It redeems in a qualifying stock redemption 300 shares for $350,000 at a time when it has paid-in capital of $100,000 and E & P of $1 million.What would be the charge to E & P as a result of the redemption?

Question

Quizplus · Accepted Answer

In a qualifying stock redemption,E & P is reduced by no more than the ratable share of the E & P of Canary Corporation attributable to the stock redeemed ($300,000 = $1 million F1F1F1S1F1F1F10 30%).

Canary Corporation Has 1,000 Shares of Stock Outstanding