### Question
How does SPECIAL RULES define disqualified preferred stock?


### Answer
Under *26 U.S.C. § 1059*, **disqualified preferred stock** is defined as:

> any stock which is preferred as to dividends if—


(A) when issued, such stock has a dividend rate which declines (or can reasonably be expected to decline) in the future,


(B) the issue price of such stock exceeds its liquidation rights or its stated redemption price, or


(C) such stock is otherwise structured—


(i) to avoid the other provisions of this section, and


(ii) to enable corporate shareholders to reduce tax through a combination of dividend received deductions and loss on the disposition of the stock

#### Citation:
  - *26 U.S.C. § 1059*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter O-Gain or Loss on Disposition of Property > PART IV-SPECIAL RULES**

