Viking Corporation Is Owned Equally by Sven and His Wife

Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. Viking redeemed 75 shares of Sven's stock for $2,000 per share on December 31, 20X3. Viking has total E&P of $500,000. What are the tax consequences to Viking because of the stock redemption?

A) No reduction in E&P because of the exchange.
B) A reduction of $150,000 in E&P because of the exchange.
C) A reduction of $187,500 in E&P because of the exchange.
D) A reduction of $375,000 in E&P because of the exchangE.The redemption will be treated as a dividend because Sven is treated as owning 100% of the corporation's stock after the redemption through his wife Olga.As a result, Viking reduces its E&P by the amount distributed.