Calculate how much stock a shareholder must have redeemed by a corporation

to qualify as a redemption under Section $302($b$)(2),$ a substantially disproportionate

redemption.

Start with the shareholder's actual and constructive ownership of stock BEFORE the

possible redemption and the total outstanding stock of the corporation. You will

make up these inputs in the gold cells.

You will then need to fill out the salmon colored cells with formulas that show

you know how to apply the Section $302($b$)$ redemption tests for each shareholder.

Columns C and E should be simple summations of information you input into

the gold cells. The real work is in columns J$,$ K$,$ and L$,$ where you'll have to

create formulas that correctly apply the $3$ tests shown immediately below

on a shareholder$-$by$-$shareholder basis. While there may be a number of formulas

that allow you to do this exercise, I would recommend using the $=$IF formula

which should be both basic enough and sophisticated enough for you to derive

the correct answer based on your own fact pattern.

You'll know your answer is correct and that you can submit your assignment

for grading if N$68,$ N$69,$ and N$70$ all say "YES".

TESTS UNDER IRC SECTION $302($b$)(2)$

$1$ Immediately after the redemption, the shareholder must own less than $50\%$ of the

total combined voting power of all classes of voting stock.

$2$ The shareholder's $\%$ ownership of voting stock immediately after the redemption must

be $<80\%$ of the same percentage immediately beforehand.

$3$ The shareholder's $\%$ ownership of common stock $($voting or nonvoting$)$ after the

redemption must be $<80\%$ of the same percentage immediately beforehand.

Calculations below are structured to allow the user to enter variable numbers of shares held

prior to the redemption, and numbers of shares to be redeemed, both for the voting and the

nonvoting common stock $($using only the gold$-$shaded cells$).$ For any given set of numbers,

the spreadsheet calculates whether the redemption passes each test $($and all three tests$)$ for

each shareholder.

CORPORATION X

BEFORE REDEMPTION

VOTING NONVOTING TOTAL

COMMON STOCK COMMON STOCK COMMON STOCK

SHAREHOLDERS SHARES $\%$ SHARES $\%$ SHARES $\%$

A $0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$

B $0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$

C $0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$

Others $0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$

$0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$

SHARES TO BE REDEEMED

VOTING NONVOTING

COMMON STOCK COMMON STOCK

SHAREHOLDERS SHARES SHARES

A

B

C

CORPORATION X

AFTER REDEMPTION

VOTING NONVOTING TOTAL

COMMON STOCK COMMON STOCK COMMON STOCK DOES THE REDEMPTION PASS:

SHAREHOLDERS SHARES $\%$ SHARES $\%$ SHARES $\%$ TEST $1?$ TEST $2?$ TEST $3?$

A #DIV$/0!$ #DIV$/0!0$ #DIV$/0!$

B #DIV$/0!$ #DIV$/0!0$ #DIV$/0!$

C #DIV$/0!$ #DIV$/0!0$ #DIV$/0!$

Others #DIV$/0!$ #DIV$/0!0$ #DIV$/0!$

$0$ #DIV$/0!0$ #DIV$/0!0$ #DIV$/0!$