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(1) In general.--Except as provided in
paragraph (2) of this subsection, section 318(a)
shall apply in determining the ownership of stock
for purposes of this section.
* * * * * * *
(d) Redemptions Treated as Distributions of
Property.--Except as otherwise provided in this
subchapter, if a corporation redeems its stock (within
the meaning of section 317(b)), and if subsection (a)
of this section does not apply, such redemption shall
be treated as a distribution of property to which
section 301 applies.
Thus, under the schematic created in section 302, unless a
redemption transaction falls into one of four enumerated
categories qualifying for treatment as a sale or exchange, it is
taxed in accordance with section 301. When evaluating whether a
transfer takes one of the four listed forms in the context of a
section 304 proceeding, section 304(b)(1) directs that such
determination be made by reference to the stock of the issuing
corporation.
Here, we conclude that the December 1996 transaction is not
among the four types afforded exchange treatment. First,
pursuant to United States v. Davis, 397 U.S. 301, 313 (1970), the
transfer cannot qualify as “not essentially equivalent to a
dividend” under section 302(b)(1). The U.S. Supreme Court ruled
in United States v. Davis, supra at 307, 313, that redemption of
the shares of a corporation’s sole stockholder is “always”
essentially equivalent to a dividend and, consequently, that a
taxpayer “who (after application of the attribution rules) was
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