Guest RogersSmith Posted May 14, 2001 Posted May 14, 2001 In order to qualify for the 1042 rollover, the selling shareholder to an ESOP can invest in stocks and bonds of US-based operating companies. Let's suppose Joe Seller buys 10,000 shares of GE as QRP. If Joe sells any of the GE QRP, will he trigger capital gains taxes on the entire ESOP transaction amount, or only on a proportional amount? Moreover, if the value of the GE shares grows, can he cash in on a portion of the gains, or is he locked into holding the shares and gains to his death? If this is the case, it appears the only logical investment for QRP would be in dividend-paying stocks, or interest-paying debt instruments.
RLL Posted May 14, 2001 Posted May 14, 2001 The basis of the employer stock sold to the ESOP becomes the basis of the qualified replacement property ("QRP"). If there is a sale of any QRP, gain is triggered only on the QRP that is sold.
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