Question

Prompt 1: List the requirements for an owner of corporate stock who sells to an ESOP to quality for the nonrecognition of gain treatment. Prompt 2: Scenario 1: Marcus, age 61, is a participant in a stock bonus plan. The value of the employer stock contributions to the plan over the course of his participation totaled $165,000. On December 1st this year, Marcus takes a full distribution of the employer stock from the plan at a value of $550,000. Fourteen months later, Marcus sells all of the stock for $400,000. Question: Which of the following statements is true? Explain your answer. Marcus has a long-term capital gain of $385,000 for this year. Marcus has ordinary income of $165,000 this year. Marcus has a long-term capital loss of $150,000 next year. Marcus has ordinary income of $165,000 and long-term capital gain of $385,000 this year.

Answer 1

An ESOP is an employee benefit plan designed with enough flexibility to be used to motivate employees through equity investors. Each year there witll be contribution from employer and employee and at the time of leaving the company, the employee receives funds by withdrawing money from ESOP funds.

In the same manner, the employer has deposited amount to Marcus ESOP fund worth 165000 $ and Marcus received 550000 $ on December 1by withdrawing money from ESOP, hence the cost is 550000 while he sold the stock for 400000 $ after 14 month and hence there will be capital loss of 150000 $ next year. i.e 550000-400000 = 150000

Threfore option C is correct.