IRS Approves Extension of 90-Day Period for Reinvestment in Company Stock in an ESOP

In PLR 200108043, the IRS ruled on a case in which a subsidiary of a holding company with various operating subsidies went public. The holding company had been closely held, and none of the members of the holding company had been publicly traded. The holding company had an ESOP, which included employees of the subsidiaries. The holding company itself had no employees. After the subsidiary went public, the stock held by the ESOP in the holding company would no longer qualify as employer securities because there was a publicly traded class of stock owned by one of the operating subsidiaries of the company. So the holding company ESOP would have to exchange its stock for stock in the now-public subsidiary. The company normally would have 90 days to do so, but it requested an extension because of the expected volatility of the stock after the IPO and because the holding company ESOP did not have the liquid assets needed to acquire the shares. The IRS approved this extension.