26 CFR § 1.1059(e)-1 - Non-pro rata redemptions.
(a) In general. Section 1059(d)(6) (exception where stock held during entire existence of corporation) and section 1059(e)(2) (qualifying dividends) do not apply to any distribution treated as an extraordinary dividend under section 1059(e)(1). For example, if a redemption of stock is not pro rata as to all shareholders, any amount treated as a dividend under section 301 is treated as an extraordinary dividend regardless of whether the dividend is a qualifying dividend.
(b) Reorganizations. For purposes of section 1059(e)(1), any exchange under section 356 is treated as a redemption and, to the extent any amount is treated as a dividend under section 356(a)(2), it is treated as a dividend under section 301.
(c) Effective date. This section applies to distributions announced (within the meaning of section 1059(d)(5)) on or after June 17, 1996.