Section 304(a)(2): Parent-Subsidiary Sales of Stock

As an example, if John owns ABC and DEF, and he transfers some of his ABC stock back to ABC in exchange for $300,000. This is a standard Section 302(b) redemption but it will obviously fail 302(b) in its present state.

There are two requirements:

  1. ABC must control DEF.
  2. John doesn’t need to be in control of ABC.
    1. The smaller the ownership John owns in ABC, the more likely John will pass one of the 302(b) tests.

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