How much can be contributed to an ESOP?
In general, a company can contribute up to 25 percent of covered payroll to an ESOP. In certain cases, the company can contribute up to 25 percent to the ESOP just to repay principal on the ESOPs debt; in addition, interest expense on the ESOPs debt may also be tax-deductible. Section 415 of the Code provides that the contribution to each individual participant cannot exceed the lesser of $49,000 (for 2009) or 100% of the employees annual compensation.
Related Questions
- Newly formed S Corp and newly formed ESOP. The S Corp buys assets from LLC to continue operating the business as S Corp. Does IRC section 1239 apply or is the ESOP NOT a related party? Who really owns the ESOP at the start?
- Announcement 2005-80 states that Management S Corporation ESOP transactions are eligible for settlement under the initiative. What abuse was involved in those transactions?
- How will distributions from the ESOP be treated?
