Gain on sale of unallocated ESOP stock is treated as annual addition u

[Guest garvey_agg]

Does anyone know of any change in the IRS's position (formally or informally) on this issue since the release of several PLRs issued in 1994?

[QDROphile]

New GCM takes an opposite approach to PLRs. As far as I know it is not yet published, but you can get it through the ESOP Association.

[Guest Harry O]

What do you mean by "opposite"?

None of the amounts allocated are annual additions?

I didn't know the IRS was still preparing GCMs. I'll have to call the ESOP Association.

Thanks.

[QDROphile]

GCM says none of the sale proceeds are annual additions. The PLRs said that the basis of the shares would be annual additions.

[MWeddell]

The IRS released a Technical Advice Memorandum stating that the gain on the sale of unallocated ESOP stock could be treated as investment earnings, not as a contribution subject to 415 limits. This also affects 401(a)(4) testing too. I first saw it publicized in the December 1997 ESOP Report published by the ESOP Association. If you call them, they should have a copy of it.

[QDROphile]

I think MWeddell is correct that it was a TAM, not a GCM as stated in my messages. Sorry.

[Guest Larry Goldberg]

I agree the TAM evidences a change in the IRS position. At least one open issue remains: What if the buyer is not an unrelated party? For example, if the Company redeems the shares from the ESOP, the IRS might still be inclined to use the Section 415 regulation to recharecterize the transaction as an annual addition subject to Section 415.

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