Deferring taxes on the sale of securities to an employee stock ownership plan
Article Abstract:
Shareholders selling securities to an employee stock ownership plan (ESOP) who purchase replacement property within three months before or 12 months after the date of sale may defer recognition of gains. A gain is only recognized if the sale amount exceeds the cost of qualified replacement property. Unless the taxpayer elects otherwise, taxpayers realizing gains from installment sales, such as in the receipt of promissory notes from the ESOP, must report gains using the installment method. Since a taxpayer does not realize the total amount of the sale until the year of the final installment payment, taxpayers receiving promissory notes from ESOPs should not use the installment method of reporting gains. The IRS has ruled that taxpayers can defer the recognition of the entire gain of the sale if the purchased property equals the amount realized on the sale of the stock to the ESOP. The gain will be calculated at the fair market value of securities sold to the ESOP and a like amount must be reinvested in replacement property within 12 months from the sale to qualify for nonrecognition of gain.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
User Contributions:
Comment about this article or add new information about this topic:
Employee achievement awards must meet strict requirements to be excludable
Article Abstract:
Regulations require that achievement and performance awards are excludable under closely-defined situations. Transfers to employees cannot be considered gifts unless it is an intrafamilial transfer for non-business purposes. Achievement awards are excludable provided the cost does not surpass the allowable deduction. Other rules address deduction limitations, definition of qualified plan awards, the form of the award, the length of employee service, safety achievements, and disguised compensation.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
User Contributions:
Comment about this article or add new information about this topic:
Treatment of employee achievement awards is simpler after TRA '86, despite new restrictions
Article Abstract:
The Tax Reform Act of 1986 (TRA 86) contains clear rules for employee achievement awards. Employees are permitted a limited exclusion and employers are permitted a limited deduction when certain award criteria are met, and computation of the taxable amount of an award is specified by the law. Various categories of awards are discussed, and suggestions for maximizing award deductions are presented.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1988
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: Freight forwarding and the accountant. Single figures for shareholders' funds
- Abstracts: Cafeteria plans: new options for insurance agencies. A guide to employee leasing
- Abstracts: Improving the quality service to members. Business legislation unit
- Abstracts: Auditors' behavior in an audit conflict situation: a research note on the role of locus of control and ethical reasoning
- Abstracts: Strategic change in the turnaround process: theory and empirical evidence. Call for nominations: fourth annual Strategic Management Journal, Strategic Management Society/John Wiley & Sons Best Paper Prize, 1996