At a time when Blackbird Corporation had E & P of $950,000 and 1,000 shares of stock outstanding,the corporation distributed $250,000 to redeem 300 shares of its stock.The transaction qualified as a disproportionate redemption for the shareholder.Blackbird's E & P is reduced by $285,000 as a result of the distribution.

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In a disproportionate redemption, E & P is reduced by the lesser of the amount distributed ($250,000) or the ratable share of E & P attributable to the redeemed shares. The ratable share is 30% of $950,000, which is $285,000. However, the reduction is limited to the distribution amount, $250,000.

At a Time When Blackbird Corporation Had E & P