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302(b)(3) and (c)(2)(A). In some circumstances, however, both
taxpayers and the Commissioner have argued that a redemption
should not be tested under section 302(b) immediately after the
redemption but only after another related transaction has
occurred. See, e.g., Bleily & Collishaw, Inc. v. Commissioner,
supra; Niedermeyer v. Commissioner, 62 T.C. 280 (1974), affd. 535
F.2d 500 (9th Cir. 1976).
In this case, petitioner contends that the deemed section
304 redemptions, i.e., the nine cross-chain sales, should be
tested under section 302(b)(3) without integrating them with the
later sales of the target corporations. Petitioner asserts that
the deemed section 304 redemptions, standing alone, did not
completely terminate the target corporations’ actual and
constructive ownership interest in the issuing corporations
because, under the attribution rules of section 318, the target
corporations continued to hold an ownership interest in those
corporations following the redemptions. Respondent contends,
however, that the section 304 redemptions at issue in this case,
i.e., the nine cross-chain sales, must be integrated with the
later sales of the target corporations in order to decide under
section 302(b)(3) whether the target corporations’ constructive
ownership of the transferred stock under section 318 was
completely terminated. The parties rely on different legal
standards in support of their respective positions.
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