This module extended the focus on
corporate operations by examining stock redemptions and partial liquidations.
A stock redemption occurs when a shareholder sell stock
back to the issuing corporation for cash or property.
However, an important tax distinction exists between
redemptions having the effect of a dividend,
that is transactions that enable shareholders to withdraw cash or other property,
while leaving their proportionate ownership interest intact and redemptions that are
sales because they reduce the shareholders proportionate ownership interest.
Along these lines, the lessons in this model examined five types of
qualifying stock redemptions that received sale or exchange tax treatment.
You also learned about the effects of redemptions whether
qualifying or not on the redeeming corporation.
The next module will shift from focusing on corporate operations to liquidations.
A liquidation occurs when a corporation ceases to be
a going concern and only exists to wind up affairs,
pay debts, and distribute any remaining assets to its shareholders.
Naturally, some important tax issues arise in
this final stage of the corporate life cycle.