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handle is hein.ali/aliftp0202 and id is 1 raw text is: I
Insert p. I

(Insert the following at the end of page 2 of Preliminary Draft 195A
regarding Stock Redemptions:)
In addition it should be noted that in order to have a redemption
which meets the 80% test and not the 50% test the company having only
common stock outstanding will have to be reduced at least 25% in size
and may be reduced a great deal more.
For example, the smallest percentage of stoch which a share-
holder can own before redemption and still have 50% of the company's
stock after a redemption qualifying under the 80% test is 62-1/2%(+). That
is, if a company with 100 shares redeems 25 (+) shares of stock from a
shareholder who owned 62-1/2 shares the 80% test is met (37-1/2(+)- is
( 75
less than 80% of 62-1/2(+). ) A 50% interest, however, is still retained.
10 o   )
The company is reduced to 3/4 of its former aize. As the majority share-
holder interest prior to the redemption increases, the reduction in the
size of the company, i. e. , the amount of shares which must be redeemed
to meet the 80% test, correspondingly increases. Thus, if ninety-nine
shares are owned by a stockholder prior to redemption in a company with
100 shares outstanding, approximately ninety-five of his shares have to be
redeemed to effect a 20% reduction of his percentage interest in the company
(which will meet the 80% test), thereby reducing the company to 1/20th of
its former size.
This effect of the 80% test raises the additional consideration that
in view of the fact that such drastic reductions are needed in order to satis-
fy the 80% test perhaps there is little need for the 50% in addition thereto.

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