Bedrock Inc. is owned equally by Barney Rubble and his wife Betty, each of whom holds 1,280 shares in the company. Betty wants to reduce her ownership in the company, and it was decided that the company will redeem 640 of her shares for $26,800 per share on December 31 of this year. Bettys income tax basis in each share is $5,450. Bedrock has a current E&P of $10,150,000 and accumulated E&P at the beginning of the year of $50,500,000.

b. What is Bettys income tax basis in the remaining 640 shares she owns in the company?

c. Assuming the company did not make any dividend distributions this year, by what amount does Bedrock reduce its E&P as a result of the redemption?