Question

Individuals prefer exchange treatment for redemptions due to the ______. (Check all that apply.)

Multiple select question.
opportunity to use a dividends received deduction
reduction in the amount of income for the adjusted basis
opportunity to lower ownership in a pro-rata fashion for all shareholders
increased ability to deduct capital losses

Answer 1

Individuals prefer exchange treatment for redemptions due to the opportunity to lower ownership in a pro-rata fashion for all shareholders.

Step-by-step explanation:

When individuals prefer exchange treatment for redemptions, it is usually because of the opportunity to lower ownership in a pro-rata fashion for all shareholders. By exchanging their shares for other assets or cash, shareholders can reduce their ownership stake in the company. This can be beneficial if they want to diversify their investment portfolio or reduce their exposure to a particular company or industry.However, the reduction in the amount of income for the adjusted basis and the increased ability to deduct capital losses are not specific advantages of exchange treatment for redemptions.