What are the tax advantages of an ESOP?
TaxConnections Members... Answer This Question
Want To be One of Our Tax Experts? Register Here
Tax Professional Answers
William Keats
ESOPs invest primarily in employer securities. Distributions are taxed like distributions from other qualified plans. The amount included is the FMV of the distribution minus the amount of employee after-tax contributions. Since distributions from ESOPs are often made in the form of company securities, rules on net unrealized appreciation may apply.
NUA is the increase in value of the securities while in the employer plan. If the distribution is a lump-sum distribution, the net unrealized appreciation is taxed only when the securities are sold; or the taxpayer can make an election to include it in income in the year received. The election is done on Form 4972.
Leave a Comment
554 weeks ago
NUA is the increase in value of the securities while in the employer plan. If the distribution is a lump-sum distribution, the net unrealized appreciation is taxed only when the securities are sold; or the taxpayer can make an election to include it in income in the year received. The election is done on Form 4972.