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Comet Company is owned equally by Pat and his sister Pam, each of whom hold...

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Accounting

Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's share on December 31 for $1,000 per share in a transaction that Pam treats as an exchange for tax purposes. What are the tax consequences to Comet because of the stock redemption? a. A reduction of $62,500 in E&P because of the exchange b. A reduction of $12,500 in E&P because of he exchange c. No reduction in E&P because of the exchange d. A reduction of $50,000 in E&P because of the exchange.

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