In a redemption of § 306 stock, the redemption proceeds constitute dividend income to the extent of the corporation's E & P on the date of the redemption.

Question

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In a redemption of § 306 stock, the proceeds are treated as dividend income to the extent of the corporation's earnings and profits (E & P) because § 306 stock is designed to prevent the conversion of ordinary income into capital gains.

In a Redemption of § 306 Stock, the Redemption Proceeds