§303 — Distributions in redemption of stock to pay death taxes
93 cases·22 followed·1 distinguished·2 questioned·1 overruled·67 cited—24% support
Statute Text — 26 U.S.C. §303
A distribution of property to a shareholder by a corporation in redemption of part or all of the stock of such corporation which (for Federal estate tax purposes) is included in determining the gross estate of a decedent, to the extent that the amount of such distribution does not exceed the sum of—
the estate, inheritance, legacy, and succession taxes (including any interest collected as a part of such taxes) imposed because of such decedent’s death, and
the amount of funeral and administration expenses allowable as deductions to the estate under section 2053 (or under section 2106 in the case of the estate of a decedent nonresident, not a citizen of the United States),
shall be treated as a distribution in full payment in exchange for the stock so redeemed.
Subsection (a) shall apply only to amounts distributed after the death of the decedent and—
within the period of limitations provided in section 6501(a) for the assessment of the Federal estate tax (determined without the application of any provision other than section 6501(a)), or within 90 days after the expiration of such period,
if a petition for redetermination of a deficiency in such estate tax has been filed with the Tax Court within the time prescribed in section 6213, at any time before the expiration of 60 days after the decision of the Tax Court becomes final, or
if an election has been made under section 6166 and if the time prescribed by this subparagraph expires at a later date than the time prescribed by subparagraph (B) of this paragraph, within the time determined under section 6166 for the payment of the installments.
Subsection (a) shall apply to a distribution by a corporation only if the value (for Federal estate tax purposes) of all of the stock of such corporation which is included in determining the value of the decedent’s gross estate exceeds 35 percent of the excess of—
the value of the gross estate of such decedent, over
the sum of the amounts allowable as a deduction under section 2053 or 2054.
For purposes of subparagraph (A), stock of 2 or more corporations, with respect to each of which there is included in determining the value of the decedent’s gross estate 20 percent or more in value of the outstanding stock, shall be treated as the stock of a single corporation. For purposes of the 20-percent requirement of the preceding sentence, stock which, at the decedent’s death, represents the surviving spouse’s interest in property held by the decedent and the surviving spouse as community property or as joint tenants, tenants by the entirety, or tenants in common shall be treated as having been included in determining the value of the decedent’s gross estate.
Subsection (a) shall apply to a distribution by a corporation only to the extent that the interest of the shareholder is reduced directly (or through a binding obligation to contribute) by any payment of an amount described in paragraph (1) or (2) of subsection (a).
In the case of amounts distributed more than 4 years after the date of the decedent’s death, subsection (a) shall apply to a distribution by a corporation only to the extent of the lesser of—
the aggregate of the amounts referred to in paragraph (1) or (2) of subsection (a) which remained unpaid immediately before the distribution, or
the aggregate of the amounts referred to in paragraph (1) or (2) of subsection (a) which are paid during the 1-year period beginning on the date of such distribution.
If—
a shareholder owns stock of a corporation (referred to in this subsection as “new stock”) the basis of which is determined by reference to the basis of stock of a corporation (referred to in this subsection as “old stock”),
the old stock was included (for Federal estate tax purposes) in determining the gross estate of a decedent, and
subsection (a) would apply to a distribution of property to such shareholder in redemption of the old stock,
then, subject to the limitation specified in subsection (b), subsection (a) shall apply in respect of a distribution in redemption of the new stock.
Where stock in a corporation is the subject of a generation-skipping transfer (within the meaning of section 2611(a)) occurring at the same time as and as a result of the death of an individual—
the stock shall be deemed to be included in the gross estate of such individual;
taxes of the kind referred to in subsection (a)(1) which are imposed because of the generation-skipping transfer shall be treated as imposed because of such individual’s death (and for this purpose the tax imposed by section 2601 shall be treated as an estate tax);
the period of distribution shall be measured from the date of the generation-skipping transfer; and
the relationship of stock to the decedent’s estate shall be measured with reference solely to the amount of the generation-skipping transfer.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.303-1 General
- Treas. Reg. §Treas. Reg. §1.303-2 Requirements
- Treas. Reg. §Treas. Reg. §1.303-2(a) Section 303 applies only where the distribution is with respect to stock of a corporation the value of whose stock in the gross estate of the decedent for Federal estate tax purposes is an amount in excess of (1) 35 percent of the value of the gross estate of such decedent, or (2) 50 percent of the taxable estate of such decedent.
- Treas. Reg. §Treas. Reg. §1.303-2(b) For the purpose of section 303(b)(2)(A)(i), the term gross estate means the gross estate as computed in accordance with section 2031 (or, in the case of the estate of a decedent nonresident not a citizen of the United States, in accordance with section 2103).
- Treas. Reg. §Treas. Reg. §1.303-2(c) §1.303-2(c)
- Treas. Reg. §Treas. Reg. §1.303-2(d) If stock includible in determining the value of the gross estate of a decedent is exchanged for new stock, the basis of which is determined by reference to the basis of the old stock, the redemption of the new stock will be treated the same under section 303 as the redemption of the old stock would have been.
- Treas. Reg. §Treas. Reg. §1.303-2(e) Section 303 applies to distributions made after the death of the decedent and (1) before the expiration of the 3-year period of limitations for the assessment of estate tax provided in section 6501(a) (determined without the application of any provisions of law extending or suspending the running of such period of limitations), or within 90 days after the expiration of such period, or (2) if a petition for redetermination of a deficiency in such estate tax has been filed with the Tax Court withi
- Treas. Reg. §Treas. Reg. §1.303-2(f) While section 303 will most frequently have application in the case where stock is redeemed from the executor or administrator of an estate, the section is also applicable to distributions in redemption of stock included in the decedent's gross estate and held at the time of the redemption by any person who acquired the stock by any of the means comprehended by part III, subchapter A, chapter 11 of the Code, including the heir, legatee, or donee of the decedent, a surviving joint tenant, survivi
- Treas. Reg. §Treas. Reg. §1.303-2(g) §1.303-2(g)
- Treas. Reg. §Treas. Reg. §1.303-2(h) For the purpose of section 303, the estate tax or any other estate, inheritance, legacy, or succession tax shall be ascertained after the allowance of any credit, relief, discount, refund, remission or reduction of tax.
- Treas. Reg. §Treas. Reg. §1.303-3 Application of other sections
- Treas. Reg. §Treas. Reg. §1.303-3(a) The sole effect of section 303 is to exempt from tax as a dividend a distribution to which such section is applicable when made in redemption of stock includible in a decedent's gross estate.
- Treas. Reg. §Treas. Reg. §1.303-3(b) See section 304 relative to redemption of stock through the use of related corporations.
93 Citing Cases
Because the estate did not terminate until it closed on December 29, 1993, see 11 U.S.C. sec. 346(i)(2) (1976); see also Firsdon v. United States, 95 F.3d 444, 446 (6th Cir. - 22 - 1996); McGuril v. Commissioner, T.C. Memo. 1999-21; Beery v. Commissioner, T.C. Memo. 1996-464, we hold that he was not entitled to claim personally in
Because the estate did not terminate until it closed on December 29, 1993, see 11 U.S.C. sec. 346(i)(2) (1976); see also Firsdon v. United States, 95 F.3d 444, 446 (6th Cir. - 22 - 1996); McGuril v. Commissioner, T.C. Memo. 1999-21; Beery v. Commissioner, T.C. Memo. 1996-464, we hold that he was not entitled to claim personally in
3765, 3845, further extended the section 179D deduction to apply to property placed in service before January 1, 2014. Congress has since made section 179D permanent. See Consolidated Appropriations Act, 2021, Pub. L. No. 116- 260, div. EE, § 102(a), 134 Stat. 1182, 1860 (2020). 13 purposes of section 179D, section 179D(c)(1) defi
303 (effective from Jan. 1, 1988); Miss. Code Ann. sec. 79-14-303 (2009). In terms almost identical to those ofULPA (1916) and RULPA (1976), the version ofthe limited partnership act that Mississippi adopted in 1987--and which was effective throughout the years at issue--provided that a "limited partner" would lose limited liability protection
303 (effective from Jan. 1, 1988); Miss. Code Ann. sec. 79-14-303 (2009). In terms almost identical to those ofULPA (1916) and RULPA (1976), the version ofthe limited partnership act that Mississippi adopted in 1987--and which was effective throughout the years at issue--provided that a "limited partner" would lose limited liability protection
303 (effective from Jan. 1, 1988); Miss. Code Ann. sec. 79-14-303 (2009). In terms almost identical to those ofULPA (1916) and RULPA (1976), the version ofthe limited partnership act that Mississippi adopted in 1987--and which was effective throughout the years at issue--provided that a "limited partner" would lose limited liability protection
x liability. The paymentwas originally intendedto be a stock redemption, but in 2008 it was recharacterized as compensationpaid by STN.Comto Kevin, which Kevin then loaned to the Adell Trust. The parties have not addressed the tax consequences under sec. 303 in regard to distributions in redemption ofstock to pay death taxes versus recharacterizingthe amount as compensation. The original estate tax return reflected a $9,300-per-unitvalue ofSTN.Com. The trust owned 1,000 shares for a $9.3 million
The task of administering the law was given to the Landmarks Preservation Commission. Penn Central Transp. Co. v. City of New York, supra at 110; see New York City Charter ch. 74, sec. 3020. The Landmarks Preservation Commission was give the power to designate landmarks, interior landmarks, and historic districts. N.Y. City Admin. Code ch
[Emphasis added.] Althoßgh the regulation acknowledges that more than one person may be in control of both corporations within the meaning of section 304, it clearly.recognizes that the person or persons in control must also have transferred stock in exchange for property.
each person transferring stock, the amount received shall be treated as a distribution of property under section 302(d), unless as to such person such amount is to be treated as received in exchange for the stock under the terms of section 302(a) or section 303. * * * [Emphasis added.] Although the regulation acknowledges that more than one person may be in control of both corporations within the meaning of section 304, it clearly recognizes that the person or persons in control must also have t
Petitioner agreed to a section 303 stock redemption and resolved to sell the classic cars to raise the necessary capital.
72, and in interpreting section 2055 itself. See Contl. Ill. Natl. Bank & Trust Co. v. United States, 185 Ct. Cl. 642, 403 F.2d 721 (1968); Levey v. Smith, 103 F.2d 643 (7th Cir. 1939). As stated in an early pronouncement: Plaintiff urges that the statutory test “is the use to which the property is to be put.” In our view the tes
Although the business converted the case to a chapter 11 proceeding, the bankruptcy court reconverted the case to a chapter 7 proceeding and appointed John Stoebner the trustee on May 28, 1992. See Stoebner v. Vaughan, 179 Bankr. 600, 601 (D. Minn. 1995). On August 21, 1992, an order was issued by the U.S. District Court for the Distri
Like the parenthetical language, the title of section 303 is "Distributions In Redemption Of Stock To Pay Death Taxes." Similarly, the parenthetical language in section 2035(d)(3)(C), "(relating to lien for taxes)", is simply a reference to the title for subchapter C of chapter 64--"Lien for Taxes".
er the facts of each particular case, there has been “material participation” by the owner or lessee so as to obligate him or her to pay self-employment tax and to be entitled to Social Security benefits. See, e.g., Davenport, Farm Income Tax Manual sec. 303, “Rents Received in Crop Shares”, particularly “Material Participation Trade-off”, pages 203-204 (1998 ed.); ALI-ABA, Halstead, ed., Federal Income Taxation of Agriculture, ch. 2 Social Security and the Farmer, particularly 16-27 (3d ed. 197
Like the parenthetical language, the title of section 303 is "Distributions In Redemption Of Stock To Pay Death Taxes." Similarly, the parenthetical language in section 2035(d)(3)(C), "(relating to lien for taxes)", is simply a reference to the title for subchapter C of chapter 64--"Lien for Taxes".
er the facts of each particular case, there has been “material participation” by the owner or lessee so as to obligate him or her to pay self-employment tax and to be entitled to Social Security benefits. See, e.g., Davenport, Farm Income Tax Manual sec. 303, “Rents Received in Crop Shares”, particularly “Material Participation Trade-off”, at 203-204 (1998 ed.); ALI-ABA, Halstead, ed., Federal Income Taxation of Agriculture, ch. 2, “Social Security and the Farmer”, particularly 16-27 (3d. 1979).
At that time, certain tax attributes, including any net operating losses, determined as of the first day of the debtor-taxpayer's taxable year in which the bankruptcy case commences, become part of the estate, and no longer belong to the debtor-taxpayer. Sec. 1398(g); Kahle v. Commissioner, T.C. Memo. 1997-91. Any remaining net ope
303, a distribution of property to a shareholder to redeem the shareholder's stock to pay death taxes is treated as a distribution in full payment in exchange for the redeemed stock. 6 One of the debentures would have matured in 2015, one in 2016, and one in 2017. -7- B. Dairy Operations 1. Milk Production and Processing Petitioner operates a
Regardless of whether a section 6166 election was made, if an executor offered shares to the Company pursuant to article VII of either agreement, the Company was required to purchase that number of shares which could be redeemed under section 303 (i.e., based on the amount of State and Federal death taxes and - 5 - administration expenses).