Hi, My name is XXXXX XXXXX I would be glad to help address your concerns, but need a bit more information, if you do not mind,
1. Did you make any contributions towards the Employee Stock Ownership Plan ?
2. Are you going to roll over the stock when you transfer it out of the Plan ?
3. If you are only transferring the stock out of the Plan, but you are not planning on selling them yet, why would you want to pay a tax on realized, but unrecognized gain if you can postpone paying the tax until you sell the stock and recognize gain ?
1. yes the company put 10% of profits into ESOP and each emplyee received a prorated amt based on their salary and was converted into shares based on the current share price and dividends are distributed quarterly and were converted to shares also. It is a privately held company.
2. I would roll over the stock when I transfer it out but keep the stock
3. the company is considering converting into a privately held S corporation and for anyone who is not working for the company (I will be retired) they will potentially require me to divest my shares in the company and convert the shares into cash. The cash distributions in the s corp will be significant and I potentially not be able to participate. My hope is that once my shares are out of the ESOP they are mine and I will be able to keep them as sharess of stock and participate in the benefits of continued growth of the company (not sure if I answered clearly for you) My tax accountant said if this approach is permitted, I would only pay taxes on the total cost basis of the shares.
Thank you for your reply, Jim,
If you keep the shares and do not cash them in, sure you could pay the tax on them, but when you ultimately sell the stock, you will still have to pay a tax on the difference between what you will have already paid (on the cost basis) and the fair market value at which you sell them,
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One last question...could my company tell me I can't pull my shares out of the ESOP and that I must take a cash value of my shares or... does ERISA require them to allow me the option to pull my shares out of the ESOP and retain full ownership of my shares providing I pay any relevant taxes on the cost basis
The only restriction which you would have to check is in the Plan itself. If an employee is not restricted by the Plan to cashing out, then he does not have to take the cash equivalent,
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