415

[Guest skc]

In a leveraged ESOP prior to the 415 limitation calculation a participant receives a contribution of principal only in the amount of $51,250. The shares released to him based on the principal/principal method is 2500. The value per share is $30 so the total value is $75,000.

If the 415 limit is $42,000 what is the number of shares can he receive so that he does not exceed the 415 limit? Is it $42,000/51250*2500?

Thanks.

[stephen]

It depends- What does the plan document say regarding 415 calculations?

If a leveraged ESOP in a C-Corporation passes the 1/3 test then you can ignore the interest allocated. Thus, only look at the principal as an annual addition. If the document allows you can look at the current fair market value. In your case it seems you are better off if you stick with the principal being allocated (the calculaiton you show).

Please confirm that this is an ESOP only (i.e. no salary deferrals) as this brings other matters of consideration to the situation.

[Guest skc]

It is an ESOP only and is a C corp that passes the 1/3 test. I'm only including principal contribution in calculation but my question is what amount of shares from those released can he receive.

Thanks.

[stephen]

The calculation you showed should work just fine.