Attorney-at-Law

UNVESTED, VESTED – WHO CARES?

In Uncategorized on 02/02/2022 at 18:39

John M. Larson, 2022-3 T. C. Memo., filed 2/2/22, was unaware that, as trustee of the ESOP of the Sub S he and his two buddies set up to stash the proceeds of their phony shelterflogging, he had to get the consent of the employees to lift the earn-out restrictions on the Sub S stock that he and they parked in the ESOP, terminate the ESOP and cash out.

Although a CPA and an attorney,”… Mr. Larson testified that he was unaware of his duties as a fiduciary of the … ESOP. We do not find his testimony credible on these points.” 2022-3 T. C. Memo., at p. 14.

Back in the day, it was OK to stash your Sub S corp’s stock in an ESOP to defer gain. But Congress killed that. An illustration of the right way to do it, quoted by Judge Courtney D (“CD”) Jones in this case, is found in my blogpost “Unvested Stock, Vested,” 4/24/17. In the end, petitioners there went a bridge too far.

John M. and his confrères self-dealt, and used the ESOP as their cookiejar. Judge CD Jones has the story, but it’s the same old. Stay at the table while the dice are hot, get up and go when they cool, hanging your employees out to dry. Btw, John M. got 121 (count ’em, 121) months hard for tax evasion. 2022-3 T. C. Memo., at p. 8.

Those of us who took Part Deux of The Great Chieftain of the Jersey Boys’ seminar on criminal tax defense last night couldn’t help.

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