For a stock redemption to qualify for sale or exchange treatment under § 303 (redemption to pay death taxes), it need not satisfy any of the § 302 redemption provisions.

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Section 303 of the Internal Revenue Code provides an exception to the general rule that the redemption of stock by a corporation is treated as a dividend to the extent of the corporation's earnings and profits. To qualify for sale or exchange treatment under § 303, a stock redemption must be made to pay estate or inheritance taxes arising from the decedent's death. Unlike § 302, § 303 does not require that the redemption be substantially disproportionate or that the shareholder have a meaningful reduction in ownership. Therefore, the statement that a § 303 redemption need not satisfy any of the § 302 redemption provisions is true.

For a Stock Redemption to Qualify for Sale or Exchange