IRC §409 + §1042

ESOP Planner

Sell to an Employee Stock Ownership Plan. Defer capital gains under §1042, or eliminate tax via 100% S-Corp ESOP.

Company Fair Market Value

% of stock sold to ESOP

Owner age

Owner's basis in stock sold

Entity type

% of sale reinvested in QRP (§1042)

Federal LTCG rate %

NIIT %

ESOP Transaction Picture

Sale proceeds to owner

Long-term capital gain

Tax WITHOUT §1042

Tax WITH §1042 rollover

Capital gains deferred

§1042 eligible?

§1042 election: C-Corp only, must sell ≥30% post-sale, reinvest in Qualified Replacement Property (US operating co. stock) within 12 months. 100% S-Corp ESOP: §512(e)(3) zero federal income tax on operating profits.

Plan your ESOP exit with us

QRP must be domestic operating corporation stock per §1042(c)(4). 3-year holding rule. 10% penalty if QRP sold early. Educational. Call 689-331-5723 or info@zerofusstaxes.com.