Under Section 4501(a), a “covered corporation” (any U.S. corporation whose shares are publicly traded) must pay a tax equal to 1% of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year. Section 4501(c)(3) provides that the amount taken into account under Section 4501(a) is reduced by the fair market value of any stock issued by the covered corporation during the taxable year, including the fair market value of any stock issued or provided to employees of the corporation or employees of a specified affiliate of the corporation during the taxable year. This is known as the “netting rule.” Read more.

Source: Unraveling SPAC Stock Redemption Taxes