Taxes

• Income Tax
  In the case of S corporation ESOPs, failure to comply with the requirements of IRC §409(p) can cause the ESOP to lose its exemption from the unrelated business income tax and can also result in Plan disqualification. To prevent this from happening, our administration staff will prepare a preliminary §409(p) analysis for your Plan prior to the beginning of each new Plan Year to determine if the projected allocations are likely to result in violating the requirements of §409(p).  If the analysis indicates that a probable violation will occur, our administration staff, together with our legal staff, will suggest options and alternatives to prevent a probable §409(p) violation.  In those cases where your lender or your outside trustee wants independent verification that your ESOP is in compliance with §409(p), we will prepare a formal §409(p) Certification that the Plan is in compliance with §409(p).
• Tax Deferral
  The §1042 tax deferral created a huge incentive for owners to sell their shares to ESOPs since that would enable them to get liquidity without triggering a capital gains tax during their lifetime. As a result, there was a large increase in the number of ESOPs installed from 1984 through.  In addition, since the ESOPs were required to purchase at least 30% at the outset, most ESOP transactions from 1984 onward were leveraged with bank loans, and most ESOP transactions began to take on the look and feel of leveraged buyout transaction.
• Capital Gains Taxes
  Most ESOPs we installed in those years started out with the ESOP acquiring a small minority interest and then gradually acquired more ownership year-by-year over the following years. In 1984, however, Congress passed the Internal Revenue Act of 1984, which included several pro-ESOP provisions, most notably the IRC §1042 tax-free rollover provision for ESOPs. Under this provision, if an ESOP acquired 30% or more of the outstanding stock of a regular C corporation, the seller could elect to pay no capital gains tax on that sale, provided that the seller purchased a like amount of qualified replacement property (U.S. stocks or bonds) within 12 months of the date of the sale.

Investment

• Bonds

Planning

• Financial Planning
• Retirement Planning