Rev. Proc. 79-52

Rev. Proc. 79-14, 1979-1 C.B. 496, sets forth areas in which advance rulings or determination letters will not be issued by the Internal Revenue Service. Section 3.017 of Rev. Proc. 79-14 states that rulings or determination letters will not be issued as to whether section 302(b) of the Code applies when the redemption payment consists entirely or partly of the corporation's promise to pay an amount that is based or contingent on the redeeming corporation's future earnings. Section 3.017 is hereby amplified to read as follows:

7 Section 302. -- Redemption of Stock. -- Whether section 302(b) of the Code applies when the consideration given in redemption by a corporation in exchange for a shareholder's stock consists entirely or partly of the corporation's promise to pay an amount that is based on, or contingent on, future earnings of the corporation, or when the promise to pay is contingent on working capital being maintained at a certain level, or any other similar contingency.