(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
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July 9, 2003JS-548
Requirements for Section 1042 Transactions
Today, the Treasury Department and the IRS issued proposed regulations affecting notarization requirements for sales to employee stock ownership plans (ESOPs) and reinvestment of proceeds under section 1042.
Section 1042 allows a taxpayer or executor to defer recognition of long-term capital gain on the sale of qualified securitiesto an employee stock ownership plan (ESOP) or eligible worker owned cooperative if the taxpayer purchases qualified replacement property within the period beginning 3 months before and ending 12 months after the sale. The proposed regulations would liberalize a procedural rule by permitting taxpayers to notarize a statement of purchase for the qualified replacement property as late as the time the taxpayers income tax return is filed for the taxable year of the purchase, instead of the current regulatory rule which requires that such notarization be done within 30 days of the date of purchase.
When finalized, these regulations will replace the existing regulations for taxable years of sellers ending from and after the date of adoption as final regulations. However, in the meantime, taxpayers can rely upon these proposed regulations for guidance with respect to all open tax years.
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