A redemption will qualify as a not essentially equivalent redemption only if the shareholder's interest in the redeeming corporation has been meaningfully reduced.

Question

Quizplus · Accepted Answer

A redemption is considered not essentially equivalent to a dividend (and thus can qualify for sale or exchange treatment) only if it results in a meaningful reduction of the shareholder's interest in the corporation, indicating a genuine change in the shareholder's relationship with the corporation.

A Redemption Will Qualify as a Not Essentially Equivalent Redemption