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Under the federal income tax rules for divorce related corporate stock redemptions: 1. The divorcing couple can arrange...

Under the federal income tax rules for divorce related corporate stock redemptions:

1. The divorcing couple can arrange for all such stock redemptions to be tax-free to both parties:

2. The spouse who owns the most shares bears all the tax consequences .

3. the divorcing couple can effectively elect to have either the transferor spouse or the non-transfer spouse bear all the tax consequences of the redemption

4. the spouse who owns the least shares always bears all the the  consequences

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Answer #1

When a redemption would result in a constructive distribution to the nontransferor, the couple can elect to have the transferor spouse taxed on the redemption proceeds.

The answer is 3. the divorcing couple can effectively elect to have either the transferor spouse or the non-transfer spouse bear all the tax consequences of the redemption

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