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26 U.S.C. § 4979A — Tax on certain prohibited allocations of qualified securities
Federal law — U.S. Code and appendices · legal_authorities
**(a) Imposition of tax** If—
(1) there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative,
(2) there is an allocation described in section 664(g)(5)(A),
(3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or
(4) any synthetic equity is owned by a disqualified person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.
**(b) Prohibited allocation** For purposes of this section, the term “prohibited allocation” means—
(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and
(2) any benefit which accrues to any person in violation of the provisions of section 409(n).
**(c) Liability for tax** The tax imposed by this section shall be paid—
(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by—
(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
(2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.
**(d) Special statute of limitations for tax attributable to certain allocations** The statutory period for the assessment of any tax imposed by this section on an allocation described in subsection (a)(2) of qualified employer securities shall not expire before the date
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Source file: Laws/federal/codes/united-states-code/title-26/section-4979a-tax-on-certain-prohibited-allocations-of-qualified-securities--0ae51d881e.md
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Source location: Title 26, Chapter 43, § 4979A; chapter-043-qualified-pension-etc-plans.md
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**(a) Imposition of tax** If—
(1) there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative,
(2) there is an allocation described in section 664(g)(5)(A),
(3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or
(4) any synthetic equity is owned by a disqualified person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.
**(b) Prohibited allocation** For purposes of this section, the term “prohibited allocation” means—
(1) any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and
(2) any benefit which accrues to any person in violation of the provisions of section 409(n).
**(c) Liability for tax** The tax imposed by this section shall be paid—
(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by—
(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
(2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.
**(d) Special statute of limitations for tax attributable to certain allocations** The statutory period for the assessment of any tax imposed by this section on an allocation described in subsection (a)(2) of qualified employer securities shall not expire before the date which is 3 years from the later of—
(1) the 1st allocation of such securities in connection with a qualified gratuitous transfer (as defined in section 664(g)(1)), or
(2) the date on which the Secretary is notified of the allocation described in subsection (a)(2).
**(e) Definitions and special rules** For purposes of this section—
(1) **Definitions** — Except as provided in paragraph (2), terms used in this section have the same respective meanings as when used in sections 409 and 4978.
(2) **Special rules relating to tax imposed by reason of paragraph (3) or (4) of subsection (a)**
(A) *Prohibited allocations* — The amount involved with respect to any tax imposed by reason of subsection (a)(3) is the amount allocated to the account of any person in violation of section 409(p)(1).
(B) *Synthetic equity* — The amount involved with respect to any tax imposed by reason of subsection (a)(4) is the value of the shares on which the synthetic equity is based.
(C) *Special rule during first nonallocation year* — For purposes of subparagraph (A), the amount involved for the first nonallocation year of any employee stock ownership plan shall be determined by taking into account the total value of all the deemed-owned shares of all disqualified persons with respect to such plan.
(D) *Statute of limitations* — The statutory period for the assessment of any tax imposed by this section by reason of paragraph (3) or (4) of subsection (a) shall not expire before the date which is 3 years from the later of—
(i) the allocation or ownership referred to in such paragraph giving rise to such tax, or
(ii) the date on which the Secretary is notified of such allocation or ownership.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Tax credit employee stock ownership plan defined** Except as otherwise provided in this title, for purposes of this title, the term “tax credit employee stock ownership plan” means a defined contribution plan which—
(1) meets the requirements of section 401(a),
(2) is designed to invest primarily in employer securities, and
(3) meets the requirements of subsections (b), (c), (d), (e), (f), (g), (h), and (o) of this section.
**(b) Required allocation of employer securities**
(1) **In general** — A plan meets the requirements of this subsection if—
(A) the plan provides for the allocation for the plan year of all employer securities transferred to it or purchased by it (because of the requirements of section 41(c)(1)(B)) 11 See References in Text note below. to the accounts of all participants who are entitled to share in such allocation, and
(B) for the plan year the allocation to each participant so entitled is an amount which bears substantially the same proportion to the amount of all such securities allocated to all such participants in the plan for that year as the amount of compensation paid to such participant during that year bears to the compensation paid to all such participants during that year.
(2) **Compensation in excess of $100,000 disregarded** — For purposes of paragraph (1), compensation of any participant in excess of the first $100,000 per year shall be disregarded.
(3) **Determination of compensation** — For purposes of this subsection, the amount of compensation paid to a participant for any period is the amount of such participant’s compensation (within the meaning of section 415(c)(3)) for such period.
(4) **Suspension of allocation in certain cases** — Notwithstanding paragraph (1), the allocation to the account of any partici
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 409
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Nonrecognition of gain** If—
(1) the taxpayer or executor elects in such form as the Secretary may prescribe the application of this section with respect to any sale of qualified securities,
(2) the taxpayer purchases qualified replacement property within the replacement period, and
(3) the requirements of subsection (b) are met with respect to such sale,
then the gain (if any) on such sale which would be recognized as long-term capital gain shall be recognized only to the extent that the amount realized on such sale exceeds the cost to the taxpayer of such qualified replacement property.
**(b) Requirements to qualify for nonrecognition** A sale of qualified securities meets the requirements of this subsection if—
(1) **Sale to employee organizations** — The qualified securities are sold to—
(A) an employee stock ownership plan (as defined in section 4975(e)(7)), or
(B) an eligible worker-owned cooperative.
(2) **Plan must hold 30 percent of stock after sale** — The plan or cooperative referred to in paragraph (1) owns (after application of section 318(a)(4)), immediately after the sale, at least 30 percent of—
(A) each class of outstanding stock of the corporation (other than stock described in section 1504(a)(4)) which issued the qualified securities, or
(B) the total value of all outstanding stock of the corporation (other than stock described in section 1504(a)(4)).
(3) **Written statement required**
(A) *In general* — The taxpayer files with the Secretary the written statement described in subparagraph (B).
(B) *Statement* — A statement is described in this subparagraph if it is a verified written statement of—
(i) the employer whose employees are covered by the plan described in paragraph (1), or
(ii) any authorized officer
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1042
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Requirements for qualification** A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(1) if contributions are made to the trust by such employer, or employees, or both, or by another employer who is entitled to deduct his contributions under section 404(a)(3)(B) (relating to deduction for contributions to profit-sharing and stock bonus plans), or by a charitable remainder trust pursuant to a qualified gratuitous transfer (as defined in section 664(g)(1)), for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan;
(2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries (but this paragraph shall not be construed, in the case of a multiemployer plan, to prohibit the return of a contribution within 6 months after the plan administrator determines that the contribution was made by a mistake of fact or law (other than a mistake relating to whether the plan is described in section 401(a) or the trust which is part of such plan is exempt from taxation under section 501(a), or the return of any withdrawal liability payment determined to be an overpayment within 6 months of such determination));
(3) if the plan of which such trust is a part satisfies the requireme
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 401
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Federal law — U.S. Code and appendices · legal_authorities
Page 3093
TITLE 26—INTERNAL REVENUE CODE
§ 4979A
and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L.
99–514 require an amendment to any plan, such plan
amendment shall not be required to be made before the
first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99–514, as amended, set out as a
note under section 401 of this title.
§ 4979A. Tax on certain prohibited allocations of
qualified securities
(a) Imposition of tax
If—
(1) there is a prohibited allocation of quali-
fied securities by any employee stock owner-
ship plan or eligible worker-owned coopera-
tive,
(2) there is an allocation described in section
664(g)(5)(A),
(3) there is any allocation of employer secu-
rities which violates the provisions of section
409(p), or a nonallocation year described in
subsection (e)(2)(C) with respect to an em-
ployee stock ownership plan, or
(4) any synthetic equity is owned by a dis-
qualified person in any nonallocation year,
there is hereby imposed a tax on such allocation
or ownership equal to 50 percent of the amount
involved.
(b) Prohibited allocation
For purposes of this section, the term ‘‘prohib-
ited allocation’’ means—
(1) any allocation of qualified securities ac-
quired in a sale to which section 1042 applies
which violates the provisions of section 409(n),
and
(2) any benefit which accrues to any person
in violation of the provisions of section 409(n).
(c) Liability for tax
The tax imposed by this section shall be paid—
(1) in the case of an allocation referred to in
paragraph (1) or (2) of subsection (a), by—
(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
Source: Supplied 2024 U.S. Code historical extraction · 26 U.S.C. § 4979A
Stored review status: historical_2024_not_currentness_verified. Same stored citation; legal effect and authority still require review.