Below is a chart of Rev. Rul. 78-401 in which the I.R.S. held that a stock redemption which reduced the majority shareholder’s interest from 90% down to 60% was not essentially equivalent to a dividend as defined in Code §302(b) because there was not a “meaningful reduction in the shareholder's proportionate interest.” Consequently, the redemption was treated as a Code §301 distribution (typically a dividend) and was not treated as a sale or exchange.
The chart can be viewed as a PDF file here: Rev. Rul. 78-401
For additional details regarding distributions in redemption of stock, see our Section 302 Flowchart.