Federal Tax

Stock Rights and Stock Dividends — Sections 305 and 306 (Portfolio 765)

  • The Portfolio, Stock Rights and Stock Dividends-Sections 305 and 306, analyzes the tax problems that arise in connection with dividend distributions of common or preferred stock and stock rights.

Description

Bloomberg Tax Portfolio, Stock Rights and Stock Dividends — Sections 305 and 306, No. 765, analyzes the tax problems that arise in connection with dividend distributions of common or preferred stock and stock rights. The Portfolio provides a framework for analysis of the tax treatment of such distributions by summarizing the early judicial determinations in this area and the statutory responses to such decisions. In addition, the cases, regulations and rulings applicable to stock dividends are discussed in detail. The Portfolio analyzes the issues as to when a distribution will be taxable; what factors must be considered in determining whether stock is common or preferred; when a distribution of preferred stock will be subject to taint under §306; and the basis and holding period issues surrounding stock distributions.

he Worksheets contain a checklist of key factors relating to stock dividends and stock rights; resolutions authorizing a stock dividend and the distribution of stock rights; an extract from a prospectus in which tracking stock was distributed; resolutions adopting a recapitalization plan; an extract from a prospectus issued by a publicly held corporation in which subscription rights were offered; and example computations.

Table of Contents

I. Introduction
II. Development of the Tax Treatment of Stock Distributions
III. Current Treatment of Stock Dividends
IV. Section 306 Stock
V. Dispositions of Section 306 Stock
VI. Avoiding the § 306 Taint
VII. Basis and Holding Period Issues

forsyth-james-2015
James Forsyth
Senior Counsel
Cozen O'Connor