What is the classification of a transaction where there has

What is the classification of a transaction where there has been a meaningful reduction of a shareholder\'s proportionate interest in the corporation, considering such factors as a reduction in control, their interest in corporate earnings, interest in corporate assets, etc.? A. A partial liquidation B. A complete redemption C. Substantially disproportionate transaction D, NOT essentially equivalent to a dividend

Solution

A. A partial liquidation

The redemption of shareholer\'s interest or reduction of shareholder\'s proportionate interest in the corporation may be treated as a dividend unless there is a significant or meaningful reduction of a shareholder\'s proportion or interest is considred as partial liquidation. if there is meaningful reduction of interest then it would be considered a partial liquidation indeed a business purpose is irrelevant.