Tammy owns 100 shares in Star Struck Corporation.The other 100 shares are owned by her husband, Tommy.Which of the following statements is true?
A)A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange for tax purposes under any circumstance.
B)A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as a dividend for tax purposes if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.
C)A stock redemption that completely terminates Tammy's direct interest in a corporation will be treated as an exchange if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS.
D)None of these choices are true.

Question

Quizplus · Accepted Answer

A stock redemption that completely terminates Tammy's direct interest in a corporation will generally be treated as a dividend for tax purposes under the family attribution rules, which attribute stock ownership between spouses. However, if Tammy waives the family attribution rules and files a "triple i" agreement with the IRS, the redemption may be treated as an exchange for tax purposes. Therefore, statement C is true. Statements A and B are both incorrect.

Tammy Owns 100 Shares in Star Struck Corporation