ESOP and 1099-R and/pr 1099-B Reporting

[Guest Edward McElroy]

An individual is entitled to receive stock worth $100,000 from an ESOP. The stock is put back to the Company. Assume the trust's basis in the stock is $20,000. I was told that the trustee would issue a 1099-R showing a non-taxable distribution and the Company would issue a 1099-B showing sale of proceeds of $100,000. This doesn't sound correct. Thanks in advance for your help. Ed

[BeckyMiller]

If the distribution qualifies as a lump-sum distribution, the 1099-R would show the total value of the distribution in box 1, the taxable value of the distribution (the trust basis in the stock) in 2a and the gain in the block for net unrealized appreciation - box 6.

Whether or not the corporation needs to issue a Form 1099-B is debated within the ESOP community. The instructions say that you are a broker if you are a corporation that regularly redeems its own stock. If this is the common ways of handling ESOP distributions and you regularly have distributions, you should probably file the form 1099-B