162(k): This provision prohibits deductions for payments made in connection with a stock redemption
. According to the legislative history, this section was enacted to clarify that all expenditures by a corporation incurred in buying its own stock are nonamortizable capital expenditures; see H Rep't No.
To be treated as an exchange, a corporate redemption
most be a complete termination of the shareholder's interest, a substantially disproportionate redemption
or a redemption
not essentially equivalent to a dividend.
302's requirements can avoid recharacterizing a stock redemption
from a capital transaction to a dividend.
rule: Under this rule, a partner recognizes gain whenever a transaction effectively results in the exchange of his or her interest in appreciated property for an interest in stock of the partner owned, acquired or distributed by the partnership.
Further, the company said that the redemption
will be made under the terms specified in the redemption
notices sent to holders and the acting redemption
agent is Computershare Trust Company NA.
The sale typically negotiated in a buy-sell agreement usually takes one of two forms: "redemption
" by the company or "cross-purchase" between shareholders?
162(k) as incurred in connection with a stock reacquisition; it explained that, although the phrase "in connection with" has a broad meaning, legislative history indicates that it is not intended to deny a deduction for an otherwise deductible amount simply because the payment is proximate in time to or arises out of the same circumstances as a redemption
. In fact, a specific example in the legislative history appears to mirror the facts in Chief Industries; see H.
197, using dictionary definitions of "acquisition" and "redemption
" and concluded that Y's redemption
was an acquisition under Sec.
The final regulations address marital-related stock redemptions
, in general, and contain a special rule that allows spouses or former spouses to agree as to which party will be taxed on the stock redemption
Generally, there are three types of buy-sell agreements: redemption
agreements (also called entity agreements), cross-purchase agreements and combination agreements.
An open question is whether variations on the transaction highlighted by the notice would include redemptions
of stock held by domestic corporations to which the dividends-received deduction is available or intra-consolidated group redemptions