IRS Rules That Holding Period in Shares of Company Stock Being Sold to an ESOP Should Include Holding Period in Company’s Predecessor

The IRS recently issued a private letter ruling that makes it easier to qualify for the deferral of taxes in connection with the sale of stock to an employee stock ownership plan (ESOP). In Private Letter Ruling 200827018, the IRS ruled that for purposes of deferring tax under Section 1042 of the Internal Revenue Code (the Code), a shareholder’s holding period in the company’s stock includes the period during which the shareholder held membership interests in a limited liability company that was the company’s predecessor.

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