As a result of a redemption, a shareholder's interest (direct and indirect) in the corporation decreased from 58% to 45%. The redemption qualifies for sale or exchange treatment as a disproportionate redemption.

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A redemption qualifies for sale or exchange treatment as a disproportionate redemption if it results in a decrease in a shareholder's interest in the corporation by at least 20 percentage points and meets certain other requirements. In this scenario, the shareholder's interest decreased from 58% to 45%, which is a decrease of more than 20 percentage points, so the redemption would qualify for sale or exchange treatment as a disproportionate redemption.

As a Result of a Redemption, a Shareholder's Interest (Direct