K owns 40 of the 100 shares outstanding of L Corporation.The remaining shares are owned by unrelated individuals.Assuming L redeems 10 shares of K's stock, the redemption will be treated as a dividend under the safe harbor tests.

Question

Quizplus · Accepted Answer

The redemption does not meet the "substantially disproportionate" test because K's ownership percentage remains above 50% after the redemption, thus it is treated as a dividend.

K Owns 40 of the 100 Shares Outstanding of L