Avoiding Traumatic ESOP 1042 Election Distress

By |August 1st, 2017|1042 QRP Solutions|

Medical scientists have identified a disorder, known as Traumatic 1042 Election Distress, that can afflict business owners who pursue Section 1042 sales of their company stock to an ESOP. The researchers recently concluded their clinical study, based on observations of hundreds patients over the past 30 years. Their newly published findings identify common stress patterns observed among business owner patients. The disorder is curable if diagnosed early.

1042 Exchange: Navigating Between a Rock and a Hard Place

By |June 20th, 2017|1042 QRP Solutions, Strategy Background, Tax Efficient Investing|

This particular Greek dilemma is what came to mind when I first encountered an ESOP. I observed that business owners who sold shares to an ESOP seemed, like Odysseus, to find themselves between a rock and a hard place. They could elect to pursue a 1042 exchange and bypass the Scylla of capital gains taxes, but in doing so they had to roll their sale proceeds into qualified replacement property. That path would likely lead to the Charybdis of Floating Rate Notes. These special ESOP bonds are the predominant 1042 exchange asset in the marketplace, a fact that belies their relative shortcomings as an investment asset. Just how unattractive floating rate notes are, and why they became the default 1042 rollover strategy among financial advisors, is the subject of this article. However, unlike Odysseus, business owners seeking to implement 1042 exchanges have more affordable and transparent paths to navigate between a rock and a hard place.

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