Which of the following statements is true?
A)All stock redemptions are treated as exchanges for tax purposes.
B)A stock redemption not treated as an exchange will automatically be treated as a taxable dividend.
C)All stock redemptions are treated as dividends if received by an individual.
D)A stock redemption is treated as an exchange only if it meets one of the tests specified in the Internal Revenue Code.

Question

Quizplus · Accepted Answer

A stock redemption is only treated as an exchange for tax purposes if it meets one of the tests specified in the Internal Revenue Code, such as a complete termination of the shareholder's interest, redemption not essentially equivalent to a dividend, or a partial liquidation of a corporation. If it doesn't meet one of these tests, it will be treated as a taxable dividend. Therefore, statement A and B are false, and statement C is only partially true.

Which of the Following Statements Is True