Tax Relief Reconciliation Act

S Corporation Rules Involving Section 409(p)

Section 409(P) of the Code, which was enacted as part of the Economic Growth and Tax Relief reconciliation Act of 2001, sets forth anti-abuse rules for ESOPs that are maintained by S corporations.  The following is to summarize the restrictions of Section 409(P), as follows: Basic Rule:  No assets of an ESOP may be allocated…

ESOP: A New Tax Savings Tool for Owners of S Corporations

“A new dawn greets ESOP companies!” “The Holy Grail of business opportunities beckons: ESOP companies can now operate tax free!” Not since 1984, when the §1042 tax-free rollover was enacted, has the ESOP community bubbled with such enthusiasm. Under the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, (“EGTRRA”), the ESOP’s…

New Law on S-ESOP Prohibited Allocations

MEMORANDUM From: Legal Department Date: January 2008 Subject: Prohibited Allocations in S Corp ESOPs Section 409(p) of the Code, which was enacted as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, sets forth anti-abuse rules for ESOPs that are maintained by S corporations. The following is to summarize the restrictions of Section…

Economic Growth and Tax Relief Reconciliation Act of 2001

Comparison of Old and New Provisions Current Law New Law (EGTRRA) I.  Increases in Contribution, Deduction and Benefit Limits Contribution Deduction Limits: An employer’s deduction for contributions (including 401(k) deferral contributions) to a profit sharing or stock bonus plan is limited to 15% of participants’ taxable compensation. The money purchase plan limit is 25%. The 15%…