Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 125 shares in the company. Viking redeemed 80 shares of Sven's stock for $1,600 per share on December 31, 20X3. Viking has total E&P of $420,000. What are the tax consequences to Viking because of the stock redemption?

Multiple Choice

• No reduction in E&P because of the exchange.

• A reduction of $128,000 in E&P because of the exchange.

• A reduction of $134,400 in E&P because of the exchange.

• A reduction of $268,800 in E&P because of the exchange.