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17. Describe the requirements for waving the family attribution rules in the case of a complete...

17. Describe the requirements for waving the family attribution rules in the case of a complete redemption. Attach Internal Revenue Code Section

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Answer #1

IRC code 302(b)(3)

If a shareholder terminates his or her entire stock ownership in a corporation through a stock redemption, the redemption will qualify for sale or exchange treatment. The attribution rules generally apply in determining whether the shareholder's stock ownership has been terminated.

For waiving off the family attribution rules in case of complete redemption both the follwing requirements have to be met:

(1) The former shareholder shall have no interest(including that of an officer, director or employee), except that of a creditor, in the corporation after redemption for atleast 10 years

(2) The former shareholder files an agreement to notify the IRS of any prohibited interest within the 10-year post-redemption period and to retain all necessary records pertaining to the redemption during this time period.

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