Which of the following statements is true?

Question

Quizplus · Accepted Answer

A stock redemption is treated as an exchange only if it meets one of three stock ownership tests described in the Internal Revenue Code (IRC). To be an exchange, one of the stock ownership tests described in §302(b) must be satisfied. If the stock redemption does not meet one of these tests, it is tested under §301 and could be a tax-free return of capital or gain from the sale of stock. Option A is incorrect as not all stock redemptions are treated as exchanges. Option B is incorrect as a stock redemption not treated as an exchange may or may not be taxable depending on the circumstances. Option C is incorrect as stock redemptions can be treated as exchanges or as dividends, depending on the circumstances.

Which of the Following Statements Is True