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QUESTION 3 C owns 60 shares and D owns 40 shares of Z Corporation, representing all of Zs outstanding shares. C and D are father

QUESTION 3

  1. C owns 60 shares and D owns 40 shares of Z Corporation, representing all of Zs outstanding shares. C and D are father and son. Z redeems all of Cs stocks. C stays on as Zs president with compensation tied to Zs profits.

    a.

    This redemption is treated as a sale or exchange under 302(b)(3).

    b.

    This redemption is dividend since C has not completed termination in his interest in Z because of the role as president.

    c.

    None of the above.

2 points

QUESTION 4

  1. C owns 60 shares and D owns 40 shares of Z Corporation, representing all of Zs outstanding shares. Cs stock is entirely redeemed for a note. C is Ds father. D hates C.

    a.

    This is a complete termination of interest under 302(b)(3).

    b.

    This is a complete termination of interest under 302(b)(3) if a family waiver of attribution is obtained.

    c.

    In all court circuits, the family hostility alone may prevent family attribution.

    d.

    B and C.

    e.

    None of the above.

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