Comet Company is owned equally by Pat and his sister Pam, each of whom holds 125 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 63 of her shares for $1,260 per share on December 31, 20X3. Pam's adjusted tax basis in each share is $500. Comet has total E&P of $310,000. What are the tax consequences to Pam because of the stock redemption?

Multiple Choice

• $79,380 dividend and a tax basis in each of her remaining shares of $125.

• $79,380 dividend and a tax basis in each of her remaining shares of $63.

• $47,880 capital gain and a tax basis in each of her remaining shares of $500.

• $47,880 capital gain and a tax basis in each of her remaining shares of $125.