I've got a tax/accounting question regarding how to handle dividend payments. The company made a compensation contribution as well as paid a dividend on preferred shares. (The ESOP holds all of the preferred stock.) These two payments were then returned to the company as payment for the ESOP loan principle. These two payments paid off the remaining ESOP loan balance. The issue has to do with the fact that there were not enough shares available to be released for the "make whole" principle. There were approximately 54,000 shares available to be released but 71,000 were needed for the dividend to abide by the make whole rule. How would this payment be accounted for? How much of the payment would be tax deductible?