Tammy owns 60 percent of the stock of Huron Corporation.Unrelated individuals own the remaining 40 percent.For a stock redemption to be treated as an exchange under the "substantially disproportionate" rule, Tammy must reduce her stock ownership to below 48 percent.

Question

Quizplus · Accepted Answer

According to the "substantially disproportionate" rule, in order for a stock redemption to be treated as an exchange, the shareholder's ownership percentage must be reduced to less than 80% of the voting power and less than 80% of the total value of the stock. In this case, Tammy owns 60% of the stock, meaning she needs to reduce her ownership to below 48% (80% of 60%) for the redemption to qualify as an exchange under this rule.

Tammy Owns 60 Percent of the Stock of Huron Corporation