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redemption in complete termination of a shareholder’s interest
(section 302(b)(3)), or a redemption from a noncorporate
shareholder in partial liquidation (section 302(b)(4)). If the
deemed redemption does not qualify under section 302(b), then the
distribution is governed by section 301.32
In this case, respondent relies only upon section 302(b)(3),
claiming that the deemed section 304 redemptions, when integrated
with the sales of the target corporations, completely terminated
the target corporations’ ownership of the issuing corporations.
Section 302(b)(3) provides that “Subsection(a) shall apply if the
redemption is in complete redemption of all of the stock of the
corporation owned by the shareholder.” See Bleily & Collishaw,
Inc. v. Commissioner, 72 T.C. 751, 756 (1979), affd. without
published opinion 647 F.2d 169 (9th Cir. 1981). The attribution
rules under section 318(a) apply in determining ownership of
stock for purposes of section 302. See sec. 302(c)(1).
II. The Parties’ Arguments Regarding the Applicable Legal
Standard
Ordinarily, whether a redemption results in the complete
termination of a shareholder’s interest in a corporation under
section 302 is determined immediately after the redemption. Sec.
32Sec. 301(a) provides: “Except as otherwise provided in
this chapter, a distribution of property (as defined in section
317(a)) made by a corporation to a shareholder with respect to
its stock shall be treated in the manner provided in subsection
(c).”
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