What is Section 303 redemption?
In short
A redemption of stock included in a decedent's estate is treated as a sale, not a dividend, up to the amount of estate taxes and funeral and administration expenses, if the stock is more than 35% of the adjusted gross estate.
Key takeaways
- Because inherited stock gets a stepped-up basis, little or no gain usually results.
- It gives the estate cash from the business to pay taxes without dividend treatment.
- Redemptions must generally occur within a set period after death.
Where it's tested
TCP: Distributions, Redemptions & Liquidations — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A shareholder owns 70% of a corporation's stock. Following a redemption, she owns 52%. Ignoring attribution, does the redemption qualify as substantially disproportionate?