S Corporation

[Randy Watson]

I believe that the sale of employer s-corp stock to the employer's plan would be a PT by virtue to 4975(f)(6). Can someone confirm this? Thanks.

[ESOP Guy]

I believe that the sale of employer s-corp stock to the employer's plan would be a PT by virtue to 4975(f)(6). Can someone confirm this? Thanks.

You need to give more detail on the type of plan. ESOPs hold S corp stock all the time.

For what it is worth only an ESOP is the pass through income exempt from the Unrelated Business Income Tax. So even if the another plan can hold S Corp stock you have an UBTI issue.

That is why S corp ESOPs are so popular. If the ESOP owns 100% of the S corp stock no one pays income tax on the business income.

I should add there are very complex rules regarding S Corp ESOPs. So before anyone goes off and thinks of setting one up you should talk to an ESOP expert.

[Randy Watson]

I believe that the sale of employer s-corp stock to the employer's plan would be a PT by virtue to 4975(f)(6). Can someone confirm this? Thanks.

You need to give more detail on the type of plan. ESOPs hold S corp stock all the time.

For what it is worth only an ESOP is the pass through income exempt from the Unrelated Business Income Tax. So even if the another plan can hold S Corp stock you have an UBTI issue.

That is why S corp ESOPs are so popular. If the ESOP owns 100% of the S corp stock no one pays income tax on the business income.

I should add there are very complex rules regarding S Corp ESOPs. So before anyone goes off and thinks of setting one up you should talk to an ESOP expert.

Not talking about an ESOP. The plan would purchase S-corp stock from the company. I think it's a PT because 4975(f)(6) appears to carve S-corp stock out of the PT exemption for qualifying securities.

[ESOP Guy]

For what is worth I agree with Sieve's answer that happened on the other thread regarding this issue. I was just slow to add that because I only like to answer when I am rather sure of my answers.

However, if you have access of the ERISA book by Sal he does have an ok section that covers this on the PT section.

[Guest Sieve]

For those interested, the other thread is here: http://benefitslink.com/boards/index.php?s...ic=43739&hl=

[Randy Watson]

I believe that the sale of employer s-corp stock to the employer's plan would be a PT by virtue to 4975(f)(6). Can someone confirm this? Thanks.

You need to give more detail on the type of plan. ESOPs hold S corp stock all the time.

For what it is worth only an ESOP is the pass through income exempt from the Unrelated Business Income Tax. So even if the another plan can hold S Corp stock you have an UBTI issue.

That is why S corp ESOPs are so popular. If the ESOP owns 100% of the S corp stock no one pays income tax on the business income.

I should add there are very complex rules regarding S Corp ESOPs. So before anyone goes off and thinks of setting one up you should talk to an ESOP expert.

ESOP Guy, thanks for your answer. I have another question. The ESOP exception for s-corp stock under Section 4975(f)(6)(B)(ii) appears to work one way (i.e., sale from shareholder-employee to ESOP). Is there another exception out there for the reverse (i.e., ESOP to shareholder-employee)?

[ESOP Guy]

I believe that the sale of employer s-corp stock to the employer's plan would be a PT by virtue to 4975(f)(6). Can someone confirm this? Thanks.

You need to give more detail on the type of plan. ESOPs hold S corp stock all the time.

For what it is worth only an ESOP is the pass through income exempt from the Unrelated Business Income Tax. So even if the another plan can hold S Corp stock you have an UBTI issue.

That is why S corp ESOPs are so popular. If the ESOP owns 100% of the S corp stock no one pays income tax on the business income.

I should add there are very complex rules regarding S Corp ESOPs. So before anyone goes off and thinks of setting one up you should talk to an ESOP expert.

ESOP Guy, thanks for your answer. I have another question. The ESOP exception for s-corp stock under Section 4975(f)(6)(B)(ii) appears to work one way (i.e., sale from shareholder-employee to ESOP). Is there another exception out there for the reverse (i.e., ESOP to shareholder-employee)?

Randy you are reaching a point where I think it is ill advised to form your positions via a chat board. I have never seen an ESOP sell shares of an S corp to one of the S Corp shareholders. The ESOPs I have worked with have tended to be a method of helping the current owners cash out.

Given the cost a PT problem can cost someone a the use of an ERISA attorney here who can know the whole set of facts sounds like cheap insurance against future problems.

Sorry can't be more of a help.