Question: EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for $200,000. The redemption represented 20% of the corporation's outstanding stock.

EG Corporation redeemed 200 shares of stock from one of its shareholders in exchange for $200,000. The redemption represented 20% of the corporation's outstanding stock. The redemption was treated as an exchange by the shareholder. By what amount does EG reduce its total E&P as a result of the redemption under the following E&P assumptions?
a. EG's total E&P at the time of the distribution was $2,000,000.
b. EG's total E&P at the time of the distribution was $500,000.

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a In a redemption treated as an exchange EGreduces its EP by the lesser of the amount distributed ... View full answer

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