Vireo Corporation redeemed shares from its sole shareholder pursuant to a written agreement between the parties that clearly identified the transaction as a stock redemption (not a dividend distribution). Since the agreement is binding under state law, the shareholder will receive sale or exchange treatment with respect to the redemption.

Question

Answer the following statement true (T) or false (F)

Answer 1

False

Rationale: Neither the terminology of the redemption agreement nor state law controls the tax treatment of a stock redemption. Instead, the Code determines the tax treatment of stock redemptions.