Senior Stock Law and Legal Definition
According to 26 USCS § 150 (d) (3) (D) [Title 26. Internal Revenue Code; Subtitle A. Income Taxes; Chapter 1. Normal Taxes and Surtaxes; Subchapter B. Computation of Taxable Income; Part IV. Tax Exemption Requirements for State and Local Bonds; Subpart C. Definitions and Special Rules], the term senior stock means “stock--
(i) which participates pro rata and fully in the equity value of the corporation with all other common stock of the corporation but which has the right to payment of liquidation proceeds prior to payment of liquidation proceeds in respect of other common stock of the corporation;
(ii) which has a fixed right upon liquidation and upon redemption to an amount equal to the greater of--
(I) the fair market value of such stock on the date of liquidation or redemption (whichever is applicable); or
(II) the fair market value of all assets transferred in exchange for such stock and reduced by the amount of all liabilities of the corporation which has made an election under this paragraph assumed by the transferee corporation in such transfer;
(iii) the holder of which has the right to require the transferee corporation to redeem on a date that is not later than 10 years after the date on which an election under this paragraph was made and pursuant to such election such stock was issued; and
(iv) in respect of which, during the time such stock is outstanding, there is not outstanding any equity interest in the corporation having any liquidation, redemption or dividend rights in the corporation which are superior to those of such stock.”
