Callow Corp. has 400 shares of stock outstanding. Callow exchanges $150,000 cash for 100 of the shares in a qualifying stock redemption. Just prior to the redemption, Callow had earnings and profits (E & P) of $300,000. By what amount will Callow Corp.’s E & P be reduced as a result of this redemption? Assume a sufficiently large additional paid-in capital account balance.
a. $150,000
b. E & P will not be reduced
c. $75,000
d. Depends on balance in additional paid-in capital