§1042. Sales of stock to employee stock ownership plans or certain cooperatives — Inbound Citations
26 U.S.C. § 1042
Cited by 16 provisions in release 119-102.
Citations to 26 U.S.C. § 1042 as a whole
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(1) A plan to which section 1042 applies and an eligible worker-owned cooperative (within the meaning of section 1042(c)) shall provide that no portion of the assets of the plan or cooperative attributable to (or allocable in lieu of) employer securities acquired by the plan or cooperative in a sale to which section 1042 applies may accrue (or be allocated directly or indirectly under any plan of the employer meeting the requirements of section 401(a))—(A) during the nonallocation period, for the benefit of—(i) any taxpayer who makes an election under section 1042(a) with respect to employer securities,(ii) any individual who is related to the taxpayer (within the meaning of section 267(b)), or(B) for the benefit of any other person who owns (after application of section 318(a)) more than 25 percent of—(i) any class of outstanding stock of the corporation which issued such employer securities or of any corporation which is a member of the same controlled group of corporations (within the meaning of subsection (l)(4)) as such corporation, orFor purposes of subparagraph (B), section 318(a) shall be applied without regard to the employee trust exception in paragraph (2)(B)(i).
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(i) the 1st allocation of employer securities in connection with a sale to the plan to which section 1042 applies, or
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(ii) the aggregate amount allocated to the benefit of all such lineal descendants during the nonallocation period does not exceed more than 5 percent of the employer securities (or amounts allocated in lieu thereof) held by the plan which are attributable to a sale to the plan by any person related to such descendants (within the meaning of section 267(c)(4)) in a transaction to which section 1042 applied.
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(22) in the case of qualified replacement property the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale or exchange of any property, to the extent provided in section 1042(d),1
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(11) In determining the period for which the taxpayer has held qualified replacement property (within the meaning of section 1042(b)) the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale of qualified securities (within the meaning of section 1042(b)), there shall be included the period for which such qualified securities had been held by the taxpayer.
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(a) If, during the 3-year period after the date on which the employee stock ownership plan or eligible worker-owned cooperative acquired any qualified securities in a sale to which section 1042 applied or acquired any qualified employer securities in a qualified gratuitous transfer to which section 664(g) applied, such plan or cooperative disposes of any qualified securities and—(1) the total number of shares held by such plan or cooperative after such disposition is less than the total number of employer securities held immediately after such sale, or(2) except to the extent provided in regulations, the value of qualified securities held by such plan or cooperative after such disposition is less than 30 percent of the total value of all employer securities as of such disposition (60 percent of the total value of all employer securities as of such disposition in the case of any qualified employer securities acquired in a qualified gratuitous transfer to which section 664(g) applied),there is hereby imposed a tax on the disposition equal to the amount determined under subsection (b).
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(2) The amount realized taken into account under paragraph (1) shall not exceed that portion allocable to qualified securities acquired in the sale to which section 1042 applied or acquired in the qualified gratuitous transfer to which section 664(g) applied determined as if such securities were disposed of—(A) first from qualified securities to which section 1042 applied or to which section 664(g) applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and(B) then from any other employer securities.If subsection (d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence.
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(A) first from qualified securities to which section 1042 applied or to which section 664(g) applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and
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(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and
Citations to §1042(a)
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(i) any taxpayer who makes an election under section 1042(a) with respect to employer securities,
Citations to §1042(b)
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(11) In determining the period for which the taxpayer has held qualified replacement property (within the meaning of section 1042(b)) the acquisition of which resulted under section 1042 in the nonrecognition of any part of the gain realized on the sale of qualified securities (within the meaning of section 1042(b)), there shall be included the period for which such qualified securities had been held by the taxpayer.
Citations to §1042(b)(3)
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(c) The tax imposed by this subsection shall be paid by—(1) the employer, or(2) the eligible worker-owned cooperative,that made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3) (as the case may be).
Citations to §1042(b)(3)(B)
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(A) the employer sponsoring such plan, or(B) the eligible worker-owned cooperative,which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and
Citations to §1042(c)
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(1) A plan to which section 1042 applies and an eligible worker-owned cooperative (within the meaning of section 1042(c)) shall provide that no portion of the assets of the plan or cooperative attributable to (or allocable in lieu of) employer securities acquired by the plan or cooperative in a sale to which section 1042 applies may accrue (or be allocated directly or indirectly under any plan of the employer meeting the requirements of section 401(a))—(A) during the nonallocation period, for the benefit of—(i) any taxpayer who makes an election under section 1042(a) with respect to employer securities,(ii) any individual who is related to the taxpayer (within the meaning of section 267(b)), or(B) for the benefit of any other person who owns (after application of section 318(a)) more than 25 percent of—(i) any class of outstanding stock of the corporation which issued such employer securities or of any corporation which is a member of the same controlled group of corporations (within the meaning of subsection (l)(4)) as such corporation, orFor purposes of subparagraph (B), section 318(a) shall be applied without regard to the employee trust exception in paragraph (2)(B)(i).
Citations to §1042(c)(1)
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(2) The term “qualified securities” has the meaning given to such term by section 1042(c)(1); except that such section shall be applied without regard to subparagraph (B) thereof for purposes of applying this section and section 4979A with respect to securities acquired in a qualified gratuitous transfer (as defined in section 664(g)(1)).
Citations to §1042(c)(2)
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(3) The term “eligible worker-owned cooperative” has the meaning given to such term by section 1042(c)(2).