Comet Company is owned equally by Pat and his sister Pam, each of whom hold 135 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 68 of her shares for $1,360 per share on December 31, 20X3. Pam's income tax basis in each share is $550. Comet has total E&P of $315,000. What are the tax consequences to Pam because of the stock redemption?

Multiple Choice

• $55,080 capital gain and a tax basis in each of her remaining shares of $550.

• $55,080 capital gain and a tax basis in each of her remaining shares of $135.

• $92,480 dividend and a tax basis in each of her remaining shares of $135.

• $92,480 dividend and a tax basis in each of her remaining shares of $68.