Redemptions of stock may be necessary to pay death taxes attributable to stock ownership in closely held corporations. Congress enacted a special relief provision, § 303 of the Internal Revenue Code. § 303 treats as an exchange (and not a dividend) a redemption of the decedent’s stock so long as more than 35% the decedent’s adjusted gross estate consists of the stock of the closely held corporation.
Chapter 21 of Business Succession Planning deals with redemptions to pay taxes pursuant to this provision and explains the requirements of § 303 and important preparatory strategies if it is foreseeable that § 303 will be used.
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