Family Corporation, a corporation controlled by Buddy's family, redeems all of Buddy's stock. For the redemption to be treated as a sale, which one of the following conditions must be met?
A)Buddy cannot be a creditor of the corporation after the redemption.
B)Buddy cannot be an officer of the corporation after the redemption.
C)Buddy cannot acquire an interest, even by inheritance, for 10 years unless the bequest was made prior to the redemption.
D)Buddy must have purchased the redeemed stock from a person whose stock ownership would be attributed to Buddy.

Question

Quizplus · Accepted Answer

For a stock redemption to be treated as a sale, one of the conditions that must be met is that the shareholder (in this case, Buddy) cannot be an officer of the corporation after the redemption. This is to ensure that the redemption does not allow the shareholder to maintain control or significant influence over the corporation, which would otherwise make the transaction resemble a dividend rather than a sale.

Family Corporation, a Corporation Controlled by Buddy's Family, Redeems All