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INTERNAL REVENUE CODE OF 1954
(e) C R O S S K E F E R E N C J E S. — For special rules relating to redemption— (1) Death Taxes.—Of stock to pay death taxes, see section 303. (2) Section 306 Stock.—Of section 306 stock, see section 306. (3) Liquidations.—Of stock in partial or complete liquidation, see section 331. SEC. 303. DISTRIBUTIONS IN REDEMPTION OF STOCK TO PAY DEATH TAXES.
(a) IN GENERAL.—A distribution of property to a shareholder by a corporation in redemption of part or all of the stock of such corporation which (for Federal estate tax purposes) is included in determining the gross estate of a decedent, to the extent that the amount of such distribution does not exceed the sum of— (1) the estate, inheritance, legacy, and succession taxes (including any interest collected as a part of such taxes) imposed because of such decedent's death, and (2) the amount of funeral and administration expenses allowable as deductions to the estate under section 2053 (or under section 2106 in the case of the estate of a decedent nonresident, not a citizen of the United States), shall be treated as a distribution in full payment in exchange for the stock so redeemed. (b) LIMITATIONS ON APPLICATION OF SUBSECTION (a).— (1) PERIOD FOR DISTRIBUTION.—Subsection (a) shall apply only
to amounts distributed after the death of the decedent and— (A) within the period of limitations provided in section 6501(a) for the assessment of the Federal estate tax (determined without the application of any provision other than section 6501(a)), or within 90 days after the expiration of such period, or (B) if a petition for redetermination of a deficiency in such estate tax has been filed with the Tax Court within the time prescribed in section 6213, at any time before the expiration of 60 days after the decision of the Tax Court becomes final, (2) RELATIONSHIP OF STOCK TO DECEDENT'S ESTATE.—
(A) IN GENERAL.—Subsection (a) shall apply to a distribution by a corporation only if the value (for Federal estate tax purposes) of all of the stock of such corporation which is included in determining the value of the decedent's gross estate is either— (i) more than 35 percent of the value of the gross estate of such decedent, or (ii) more than 50 percent of the taxable estate of such decedent. (B) SPECIAL RULE FOR STOCK OF TWO OR MORE CORPORATIONS.—
For purposes of the 35 percent and 50 percent requirements of subparagraph (A), stock of two or more corporations, with respect to each of which there is included in determining the value of the decedent's gross estate more than 75 percent in value of the outstanding stock, shall be treated as the stock of a single corporation. For the purpose of the 75 percent requirement of the preceding sentence, stock which, at the decedent's death, represents the surviving spouse's interest in property held by the decedent and the surviving spouse as community property shall § 302(e)
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