This Article reviews the redemption provisions of both section 302 and section 304 of the Internal Revenue Code. It discusses the existing rules for basis recovery in dividend equivalent redemptions, and highlights the situations where the recovery of the basis of the stock redeemed becomes a problem. A number of cases, revenue rulings, and hypothetical illustrations where the basis recovery of redeemed stock has created or potentially could create a problem are examined. The Article also analyzes the tax policies which may influence the structure of a basis recovery procedure in dividend equivalent redemptions, and suggests the recovery method which should be adopted. Finally the legislative changes proposed by the American Bar Association's Section of Taxation are reviewed and discussed.
4 Va. Tax Rev. 85 (1984)