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1042 Rollover Advisors, Consultants & Advisors
ESOP Marketplace connects you with local 1042 Rollover Advisors
One of the key advisors is the wealth advisor who helps the business owner throught the ESOP transaction. The gain on the sale of stock to a C corporation ESOP may be deferred (or eliminated) under an IRC § 1042 tax-free rollover. The tax deferral applies to sales proceeds invested in qualified replacement property (QRP). If the QRP is subsequently sold before the death of the holder, a taxable event occurs. However, if the QRP is held until the death of the holder, the QRP passes to the holder’s estate and would, in years after 2010 (unless the estate tax repeal is made permanent), receive a stepped-up basis, subject to estate tax regulations. Thus, the deferred gain would escape taxation.
All ESOP transactions are stock sales, which qualify for favorable capital gain treatment to the sellers even if the IRC § 1042 election is not available (in the case of S corporations) or not elected. This is an important advantage to using the ESOP exit strategy because many other sales of closely held companies are asset-based transactions that often produce less favorable tax results for the sellers
With some advance planning, it is also relatively easy for S corporation owners (sellers) to re-elect the C corporation status to qualify for the IRC § 1042 election. Our 1042 Rollover Advisors will help business owners and their advisors navigate through the myriad of alternatives and choices.