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Unformatted text preview: 3912e94fb5458724682ec998ef85a76ae52b89ee.doc. Page 1 of 2 LTR-RUL, UIL No. 302.00-00 Distributions in redemption of stock, Letter Ruling 200025035, (Mar. 22, 2000) Distributions in redemption of stock [Code Sec. 302 ] We respond to your letter dated October 8, 1999, in which you requested rulings under section 302(b)(3) of the Internal Revenue Code on a proposed redemption. The information submitted in that letter and later correspondence is summarized below. Corporation X was incorporated on Date 1 and elected to be taxed as a Subchapter S corporation on Date 2. Corporation X was engaged in Business A. On Date 3, Corporation Y was incorporated as a Subchapter S corporation and acquired all of the stock of Corporation X from the two shareholders of Corporation X, Shareholder 1 and Shareholder 2, who received all of the stock of Corporation Y in exchange for their Corporation X stock. Corporation Y elected to treat Corporation X as a qualified Subchapter S subsidiary under section 1361(b)(3)(B) of the Code. Shareholder 1 is the mother of Shareholder 2 and has never been active in the day-to-day management of either Corporation X or Corporation Y. Shareholder 2 has been continuously employed on a full-time basis by the Corporations since graduating from college and is the current President and CEO of Corporation Y. Shareholder 1 received all of her stock in Corporation X under the final will of her deceassed husband during the ten years immediately proceding the proposed redemption. Shareholder 2 acquired his shares of stock in Corporations X and Y from purchases from Shareholder 1 and other parties during the ten years immediately preceding the proposed redemption. Corporation Y currently has 900,000 shares of voting common stock outstanding which are owned as follows: Number of Shareholder shares owned % owned Shareholder 1 455,000 50.56 Shareholder 2 445,000 49.44 Shareholder 1 desires to withdraw from ownership of Corporation Y and to transfer complete control of the corporation to Shareholder 2. Accordingly, the following transactions are proposed:...
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.
- Spring '08