Lesson 6B-Objectives

After completing this lesson, students should be able to:

1.   Determine whether a distribution to a shareholder in connection with a redemption of shares qualifies for "sale or exchange" treatment by applying the rules related to "complete termination of interest" redemptions to hypothetical fact situations.

2.  Understand the effect of the constructive ownership (attribution) rules on the determination of when a complete termination of a shareholder's interest has occurred.

3.  Describe the terms under which a waiver of the constructive ownership rules may be available to allow a redemption transaction to qualify for sale treatment.  

4.  Determine the consequences to the distributee and effect on a corporation's earnings and profits of the following types of redemption transactions:

	a.  redemption qualifying for sale treatment
	b.  redemption not qualifying for sale treatment (i.e. treated as dividend to extent of e&p)
	c.  redemption using appreciated or depreciated property of the corporation.