Question

What constitutes a qualifying disposition under IRC 1.1368-1(g)(2)(i)?

Answer

According to Instructions for Form 1120-S, a qualifying disposition under IRC 1.1368-1(g)(2)(i) is:

1. A disposition by a shareholder of at least 20% of the corporation's outstanding stock in one or more transactions in any 30-day period during the tax year,
2. A redemption treated as an exchange under section 302(a) or 303(a) of at least 20% of the corporation's outstanding stock in one or more transactions in any 30-day period during the tax year, or
3. An issuance of stock that equals at least 25% of the previously outstanding stock to one or more new shareholders in any 30-day period during the tax year.

UltraTax CS does not verify the requirements for a qualifying disposition have been met.

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