15 Which of the following statements is true Multiple Choice

15. Which of the following statements is true?

Multiple Choice

A. All stock redemptions are treated as exchanges for tax purposes.

B. A stock redemption NOT treated as an exchange will automatically be treated as a taxable dividend.

C. All stock redemptions are treated as dividends if received by an individual.

D. A stock redemption is treated as an exchange only if it meets one of 3 stock ownership tests described in the Internal Revenue Code.

Solution

Option D is the answer

Three stock ownership tests have been laid down in the Internal Revenue Code. Redemption of stock is treated as exchange only if such redemption meets one of those three tests. So, option D is the answer

Not all stock redemptions can be termed as exchanges. All the other options are incorrect.