Blue Ridge ESOP Associates Industry News

The Beginner’s Guide to S Corporation Stock Basis Adjustments*

Posted by Maren Noll

Mar 30, 2021 5:02:30 PM

To know how to adjust S Corporation stock basis, we first need to answer the question: What is stock basis? Stock basis is the amount of original value or cost of the shares, which is needed for tax purposes. For S Corporations, though, stock basis becomes a moving target because it goes beyond just the original cost of the shares. Stock basis for S Corporations also considers annual fluctuations in income or loss, and deductions.

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Topics: S-Corp

Dividend Rules for ESOP Companies

Posted by Scott J. Freund, QPA, QKC

Nov 15, 2016 1:41:38 PM

Many C Corporation companies who sponsor an Employee Stock Ownership Plan elect to pay dividends to their ESOP.  This article will provide a summary of the rules that the company needs to follow if they wish claim a deduction on the dividends paid to the ESOP.

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Topics: S-Corp, Dividend Rules, IRC, C-Corporation

Your ESOP and S Corporation Distributions

Posted by Kelly Almond

Jan 21, 2016 10:47:47 AM

It’s not unusual for an S Corporation to find that contributions to the company’s ESOP and 401(k) plans might exceed a deduction limit, particularly if the ESOP is leveraged. The combined deduction limit is limited to 25% of eligible compensation paid during the company’s fiscal year.

So your company makes deposits to its ESOP to provide the funds needed for debt service and distributions. You remember that your third party administrator (TPA) mentioned something last year about your company contributions being just within your deduction limit. It might be time to look at funding your ESOP with contributions and S Corporation distributions.

What does this mean to your ESOP?  

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Topics: S-Corp