Which of the Following Statements Is Not True About Redemptions

question 90

Multiple Choice

Which of the following statements is not true about redemptions?

• A) Redemptions of Sec. 306 stock are generally treated as dividends to the shareholder.
• B) Redemptions to pay death taxes are treated as dividends to the shareholder.
• C) A sale of stock from one controlled corporation to another controlled corporation is treated as a redemption.
• D) A distribution in redemption of stock is generally a dividend.

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Definitions:

Market Value

The price that a buyer pays to purchase shares of capital stock in the open market. Of course, for every buyer there is a seller.

Face Value

The nominal or dollar value printed on a security or instrument, such as a bond or currency note.

Contract Rate

The agreed-upon rate specified in a contract for performing services or supplying goods.

Bond Indenture

A contract that spells out the provisions of the contract between the corporation and bondholder.