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GiftLaw Pro Home   >  Chapter 4 - Specific Property Gifts  >  4.6 IRA, Pension and IRD  >  4.6.7 ESOPs and Qualified Replacement Property  >  Basic Quiz

Basic Quiz - 4.6.7 ESOPs and Qualified Replacement Property

1. A business owner of a corporation can sell that stock to an employee stock option plan (ESOP) after one year of owning such stock.
           
2. An ESOP allows a business owner to sell the business to employees without incurring a large capital gains tax immediately.
           
3. Often, business owners contemplating an ESOP have a high basis in their company stock.
           
4. The business owner must sell at least 50% of his or her stock to the ESOP in order for the plan to purchase qualified replacement property (QRP).
           
5. After the owner sells some of the company stock, he or she is free to invest those proceeds in any investment.
           
6. QRP consists of certain publicly traded stocks.
           
7. If an owner has utilized an ESOP and now holds QRP, it is possible to use the QRP to fund a CRT and then sell the QRP without incurring any capital gains tax.
           
8. When a business owner creates an ESOP and purchases QRP, the QRP receives a step up in basis.
           
9. If an ESOP is created and the QRP is used to fund a CRT, the owner / donor does not receive a tax deduction for establishing the CRT.
           
10. It is permissible for only a portion of QRP to be used to fund a CRT.