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    #31
    Originally posted by Roland Slugg
    2) Contrary to someone's post above, the related taxpayer rule of Code §318(a)(1)(A) does not apply if there is a complete termination of a shareholder's interest. See Code §302(c)(2)
    I believe you misinterpreted code §302(c)(2). ¶A indicates that 318 does not apply but ¶B says that ¶A does not apply if son or daughter are constructive owners with distributee father. In this case the son is purchasing the stock direct from father rather than a redemption, so code §318 should not be an issue for father unless the whole transaction is reclassified on audit as a redemption because of FMV, unrealistic economics, or shame transaction.

    The only other problem with code §318 is daughter's planned redemption which if redeemed after father's sale of 100% would appear to not be a problem, but if redeemed before father's sale code §318 would possibly be a problem. However, the complete liquidation with no further employment by daughter should avoid the problem in that case.

    Originally posted by §302(c)(2)(A):
    (A) In the case of a distribution described in subsection
    (b)(3), section 318(a)(1) shall not apply if -
    (i) immediately after the distribution the distributee has
    no interest in the corporation (including an interest as
    officer, director, or employee), other than an interest as a
    creditor,
    (ii) the distributee does not acquire any such interest
    (other than stock acquired by bequest or inheritance) within
    10 years from the date of such distribution, and
    (iii) the distributee, at such time and in such manner as
    the Secretary by regulations prescribes, files an agreement
    to notify the Secretary of any acquisition described in
    clause (ii) and to retain such records as may be necessary
    for the application of this paragraph.
    Originally posted by §302(c)(2)(B):
    (B) Subparagraph (A) of this paragraph shall not apply if -
    (i) any portion of the stock redeemed was acquired,
    directly or indirectly, within the 10-year period ending on
    the date of the distribution by the distributee from a person
    the ownership of whose stock would (at the time of
    distribution) be attributable to the distributee under
    section 318(a), or
    (ii) any person owns (at the time of the distribution)
    stock the ownership of which is attributable to the
    distributee under section 318(a) and such person acquired any
    stock in the corporation, directly or indirectly, from the
    distributee within the 10-year period ending on the date of
    the distribution, unless such stock so acquired from the
    distributee is redeemed in the same transaction.

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