In a not essentially equivalent redemption [§ 302(b)(1)], the meaningful reduction test is an objective safe harbor rule that taxpayers can rely upon for sale or exchange treatment.

Question

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The meaningful reduction test is not an objective safe harbor rule; it is a subjective test used to determine if a redemption is substantially equivalent to a dividend, requiring a facts and circumstances analysis.

In a Not Essentially Equivalent Redemption [§ 302(b)(1)], the Meaningful