Section 306 of the IRC was enacted by Congress to prevent tax avoidance by distributing certain stock to a shareholder in a nontaxable stock dividend
Briefly describe your rationale for the thesis statement
July 10, 2020Is there Gender and Race bias in our Court System?
July 10, 2020Section 306 of the IRC was enacted by Congress to prevent tax avoidance by distributing certain stock to a shareholder in a nontaxable stock dividend
Preferred Stock Bailouts Please respond to the following:
- Section 306 of the IRC was enacted by Congress to prevent tax avoidance by distributing certain stock to a shareholder in a nontaxable stock dividend. Section 306 prevents shareholders from using a preferred stock bailout to convert ordinary income into a capital gain. Analyze the key provisions of Section 306 of the IRC, and outline a tax- planning strategy geared toward redeeming preferred stock with sale or exchange treatment as an alternative to Section 306.
- From your analysis of Section 306 in the e-Activity, differentiate between the tax treatment of earnings and profit on the distributing corporation of both a sale of Section 306 stock and redemption of Section 306 stock. Suggest the most important reasons for this differentiation in tax treatment.
