ALC

Thanks again - very helpful. One last question to bounce off you if you don't mind, if the Buyer wants to make a 338(h)(1) or 336(e) election would that cause the Trustee to have to pass through the vote to the ESOP participants? Those elections would cause the transaction to be treated as a deemed asset sale for federal income tax purposes. Or are we able to maintain the position from the ESOP’s perspective that it is a stock sale even though an election is made to treat it as an asset sales for federal income tax purposes?

In some circumstances yes, in other circumstances the LLC wouldn't be a disregarded entity and would be a true pass through LLC entity. I think that would be problematic for the ESOP under 409(l).

Good feedback, all things I agree with. Only other question I have is that during the F Reorg process whereby the S corp (owned by the ESOP) drops its assets down into a subsidiary that ultimately converts to an LLC (taxed as a partnership) immediately before closing...does that create any qualification issues for the ESOP as the LLC would no longer be in a controlled group with the ESOP due to being taxed as a partnership?

Have you run across a situation in the M&A context where buyer of a 100% ESOP S corp is wanting the S corp to go through an F Reorg? Any issues with converting the operating company below the S corp to an LLC for purposes of the F reorg immediately before closing?