I used to work for a private company and I amassed an ESOP with aprox $20K in value. I did not invest any of my own money; these were bonuses awarded via the ESOP over the course of 5 years. I no longer work for the company, but I am 100% vested.

The company is being bought out for cash, and I'll soon be receiving (I assume) a check for the value my share in the ESOP.

I want to take most of the payout and invest it into an IRA, but I also have about $5K in debt I'd like to pay off with these proceeds.

Are there any tax implications with this plan? Any advice?

mtz206@yahoo.com

Hi mtz206 ---

To the extent that your ESOP benefit distribution is not directly transferred to an IRA (or other eligible retirement plan), your distribution check will be made net of federal (and maybe state) withholding tax.

In addition, any portion of the total distribution amount (including any amount withheld for taxes) that is not "rolled over" to an IRA or other eligible retirement will be taxable as ordinary income and also subject to a 10% additional "early distribution" tax (plus possible additional state taxs) if you have not attained age 59-1/2.

You ought to get advice specific to your situation from a qualified tax/financial adviser.