Forgotten S-corp ESOP

[Guest Phil Schwartz]

S-corp ESOP – effective 2001, terminated 12/31/2004. No administration was ever done. My recommendation is to bring it in under VCR. My concern is - what if they classify it as an abusive transaction. The attorney feels comfortable that it is not, however, a review of a different plan by this attorney, felt that it was.

Another question – since no payments were ever made on the note, should they rush to setup an account to put all the money in? or it doesn’t make a difference?

[namealreadyinuse]

If no administration was done since the termination, it probably isn't terminated. The IRS position is that it is an ongoing plan (a wasting trust or something like that) if the trust is not distributed within 1 year from the date of the proposed termination. If it is an S Corp ESOP that fails 409(p), that may mean big trouble becaue of the 409(p) excidistribution does not That sounds like it will be pretty tough under VCP.

If no adminstration was ever done (since 2001), it can't be saved.