Esop

[Guest Bdocbrock]

Situation: Participant (A) wants to purchase Co. Stock for his self-directed 401(k) account from Participant (B) who has Co. Stock in his self directed rollover account. Shares are segregated in the plan and not subject to trustee direction. They were purchased by Participant (B) from a minority shareholder outside of the plan and are within participant (B)'s self-directed rollover account. Questions:

1. Is this allowed? If so, is this done strictly with in the plan, or is it possible to use funds outside the plan to make the purchase?

2. What value of the stock is to be used for the sale, the last appraised value or can the participants negotiate a value? Participant (B) wants to sell at a greater rate than the last valuation due to earnings since last valuation.

3. If this is an acceptable transaction, is there any concern if one of the participants is a party-in-interest?

Please also respond to dbrockway@kidderbenefits.com. Thank you.

[mbozek]

Assuming the custodians for both A and B agree to permit the transfer of the stock in return for a cash payment by A to B it would be permissible for a private sale to occur between the parties, provided securities laws are complied with (I believe some custodians will not handle transfers of non public co beteen private parties.) However the fiduciary for the plan may prohibit such a transfer. The value of the stock will be the value negotiated by the parties. The IRS does not regulate the price of the sale. However there cannot be sale between a party in interest and the IRA or a plan participant. See IRC 4975©.

[Kirk Maldonado]

Mbozek:

Read 4975(d)(13).

[Kirk Maldonado]

Here's a cite to an article on this general topic:

http://www.fool.com/taxes/2002/taxes021004.htm