1042 election with a twist

[Guest BTCISP1969]

When a shareholder sells his stock to the ESOP and elects the 1042 tax treatment, can he also participate in the ESOP shares at a later time?

[RLL]

BTCISP1969 ---

Check out IRC Section 409(n), which imposes strict limitations on the allocation of "1042 shares" to an individual who makes a 1042 election.

To the extent that the ESOP allocates shares (or other amounts) which are not covered by Section 409(n), the shareholder might be eligible to participate in the ESOP.