S corporations owned by ESOPs present tax exemption opportunity

Article Abstract:

C corporations with an employee stock ownership plan (ESOP) shareholder are entitled to tax exemptions under the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997. If an ESOP is the lone shareholder of an S corporation, both the shareholder and the corporation can be exempt from federal income tax and state income taxes. Under Section 1042, capital gains taxes can be avoided by both a closely held corporation and its shareholders if they elect to sell their stock to an ESOP. This tax exemption opportunity makes it more attractive for C corporations with an ESOP shareholder to convert to an S status. However, C corporations should consider several issues before making an S election. These include possible loss of a fiscal year-end, alternative minimum tax, expenses owed to shareholders and state law treatment.

Tax Law, Public Finance Activities, Tax Deductions & Exemptions, Stock Ownership Plans, Corporate Tax Rates, Taxation, Laws, regulations and rules, Corporate taxes, Tax deductions, S corporations, Tax exemption, Tax exemptions, Tax rates, Employee stock ownership plans

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Maximizing contributions under Code sec. 403(b)

Article Abstract:

Employees of nonprofit institutions may be able to defer taxation on compensatory income by contributing to plans pursuant to IRC section 403(b). Such deferral requires consideration of past and current income and contributions. Statutory maximum deferral amounts for these and other plans and the complex interaction of plans requires attention and planning. Reference to examples and a detailed table containing comparative figures may be beneficial.

United States, Pension Funds & Benefit Plans, Religious, Grantmaking, Civic, Professional, and Similar Organizations, Nonprofit Institutions, Planning, Compensation and benefits, Pension funds, Employee benefits, Nonprofit organizations

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