We have previously discussed how the IRS Will Continue to Litigate Deductible Redemptive Dividends and some related cases. In Nestlé Purina Petcare Co. v. Commissioner of Internal Revenue, No. 09-1381 (8th Cir. 2010), the U.S. Court of Appeals for the Eighth Circuit affirmed the Tax Court's ruling (Ralston Purina Co. v. Commissioner, 131 T.C. No. 4 (September 10, 2008)) that found that IRC Section 162(k) renders payments to an ESOP that were distributed to terminated participants nondeductible under IRC Section 404(k) because they are in connection with a redemption of stock.

For a history of Deductible Redemptive Dividends Litigation and discussions on how the courts originally allowed a company to use redemptive dividends to make distribution payments in Boise Cascade Corp. v. U.S. (9th Cir., No. 01-36086, 5/20/03) and General Mills v. United States, No. 06-3547 (D. Minn. 1/14/08), see Deductible Redemptive Dividends Used to Fund ESOP Distributions.