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Part 1 There is much speculation that the capital gains tax rate may increase at some point in the future. If so, we may see an increasing number of tax-deferred sales to an ESOP (i.e., Section 1042 sales).

One of the main purposes of an ESOP is to provide benefits to the participants.

One of the ways to fund ESOP repurchase obligations is to create a "sinking fund" in the ESOP. This involves making contributions to the ESOP that are greater than what is needed on a current basis for distributions, thereby creating a fund that can be used to meet future liquidity needs.

As I mentioned in my last column, the status of the ESOP plan sponsor as an S corporation can trigger different consequences for the participants in such ESOP than if the plan sponsor were a C corporation.

I recently wrote here on the subject of tracking the cost basis of shares owned by an ESOP. The determination of cost basis is relevant when a distribution is made from the ESOP to a former participant in the form of shares of company stock.

Does employee ownership motivate people? Not much.

The Cost Accounting Standards Board (CASB) issued a final ruling in May 2008 that applies to federal government contractors who sponsor ESOPs. The effective date of 48 CFR Part 9904 was June 2, 2008. It amends CAS 412 and 415.

The Supreme Court's CIGNA v. Amara Decision May Look Like a Win for Employers, But Opens Up New Avenues for Employees as Well

Robert Wrixon

Are your company's ESOP repurchase obligations like a monster hiding in the closet? How can you tell if they're a fire-breathing dragon or a harmless little mouse? How can you develop a plan for managing and funding repurchase obligations if you don't know what they are?