It is now March 2, 2000. Company decides that it wants to adopt an ESOP effective as of January 1, 2000. Company wants to
terminate its "S" election (which it has until 3-15-2000 to do)effective as of 1-1-2000. Then, Company wants to have the sale effective as of 1-1-2000 and use section 1042. All employee allocations would be based on compensation from 1-1-2000 forward. Any thought about whether this is okay??? Is it okay as long as the stock valuation for 1-1-2000 is not significantly different from the closing date stock valuation?

I don't understand what you mean by "Company wants to have the sale effective as of 1-1-2000." What's wrong with having it effective as of the date the sale occurs?

When an ESOP purchases closely-held employer stock from a party-in-interest, the purchase price must not exceed "fair market value" determined as the purchase date.

Mr. RLL