Question

IRC 302(b)(2) states that a redemption will be treated as an exchange if the redemption is “a disproportionate distribution” The determination of whether a redemption qualifies under this provision is: a. very subjective. b. very objective.

Answer 1

Solution

IRC 302(b)(2) states that a redemption will be treated as an exchange if the redemption is “a disproportionate distribution” The determination of whether a redemption qualifies under this provision is very subjective because each case is depended upon a factual inquiry into all aspects of transaction to determine whether or not the "net effect" of the transaction more closely resembled a corporate dividend than a sale of stock.

Correct answer is option a .