Instructions For Form 5330 - Internal Revenue Service (Page 4 of 13) in pdf

March 31, 2007, should be shown as

section 1042(c)(1) or a section 664(g)

664(g)(5)(A) prohibits any portion of the

03/31/2007.

transfer).

assets of the ESOP attributable to

securities acquired by the plan in a

The tax is 10% of the amount

Item G. Plan number. Enter the

qualified gratuitous transfer to be

realized on the disposition of the

three-digit number that the employer or

allocated to the account of:

plan administrator assigned to the plan.

qualified securities if an ESOP or

a. Any person related to the

eligible worker-owned cooperative (as

Item H. Amended return. If you are

decedent (within the meaning of section

defined in section 1042(c)(2)) disposes

filing an amended Form 5330, check

of the qualified securities within the

267(b)) or a member of the decedent’s

the box on this line, and see the

family (within the meaning of section

3-year period described above, and

instructions for Part II, lines 17 through

2032A(e)(2)), or

either of the following applies:

19. Also see Claim for Refund or

•

b. Any person who, at the time of

The total number of shares held by

Credit/Amended Return, earlier.

that plan or cooperative after the

the allocation, or at any time during the

Filer’s signature. Please sign and

1-year period ending on the date of the

disposition is less than the total number

date the form. Also enter a daytime

acquisition of qualified employer

of employer securities held immediately

phone number where you can be

securities by the plan, is a 5%

after the sale, or

•

reached.

Except to the extent provided in

shareholder of the employer

Preparer’s signature. Anyone who

regulations, the value of qualified

maintaining the plan.

3. The accrual or allocation of S

prepares your return and does not

securities held by the plan or

corporation shares in an ESOP during

charge you should not sign your return.

cooperative after the disposition is less

For example, a regular full-time

than 30% of the total value of all

a nonallocation year constituting a

employee or your business partner who

employer securities as of the

prohibited allocation under section

409(p).

prepares the return should not sign.

disposition (60% of the total value of all

4. Any synthetic equity owned by a

employer securities in the case of any

Generally, anyone who is paid to

qualified employer securities acquired

disqualified person in any nonallocation

prepare a return must sign it and fill in

in a qualified gratuitous transfer to

year.

the Paid Preparer’s Use Only area.

which section 664(g) applied).

The paid preparer must complete the

Prohibited allocations for ESOP or

See section 4978(b)(2) for the

required preparer information and —

worker-owned cooperative. For

limitation on the amount of tax.

•

Sign the return by hand, in the space

purposes of items 1 and 2 above, a

The section 4978 tax must be paid

provided for the preparer’s signature

prohibited allocation of qualified

by the employer or the eligible

(signature stamps and labels are not

securities by any ESOP or eligible

worker-owned cooperative that made

acceptable).

worker-owned cooperative is any

•

the written statement described in

Give a copy of the return to the filer.

allocation of qualified securities

section 1042(b)(3)(B) on dispositions

acquired in a non-recognition-of-gain

Part I—Taxes

that occurred during their tax year.

sale under section 1042 which violates

The section 4978 tax does not apply

section 409(n); and any benefit that

Line 4. Section 4976 — Tax on

to a distribution of qualified securities or

accrues to any person in violation of

Disqualified Benefits for Funded

sale of such securities if any of the

section 409(n).

Welfare Plans. Section 4976 imposes

following occurs:

an excise tax on employers who

Under section 409(n), an ESOP or

•

The death of the employee;

maintain a funded welfare benefit plan

worker-owned cooperative cannot allow

•

The retirement of the employee after

that provides a disqualified benefit

any portion of assets, attributable to

the employee has reached age 59

;

during any tax year. The tax is 100% of

employer securities acquired in a

•

The disability of the employee (within

the disqualified benefit.

section 1042 sale, to accrue or be

the meaning of section 72(m)(7)); or

allocated (directly or indirectly) to the

Generally, a disqualified benefit is

•

The separation of the employee from

taxpayer involved in the transaction (or

any of the following:

service for any period that results in a

•

any person related to the taxpayer)

Any post-retirement medical benefit

1-year break in service (as defined in

during the nonallocation period. For

or life insurance benefit provided for a

section 411(a)(6)(A)).

purposes of section 409(n), relationship

key employee unless the benefit is

For purposes of section 4978, an

to the taxpayer is defined under section

provided from a separate account

exchange of qualified securities in a

267(b).

established for the key employee under

reorganization described in section

section 419A(d);

The nonallocation period is the

•

368(a)(1) for stock of another

Any post-retirement medical benefit

period beginning on the date the

corporation will not be treated as a

or life insurance benefit unless the plan

qualified securities are sold and ends

disposition.

meets the nondiscrimination

on the later of:

•

requirements of section 505(b) for

For section 4978 excise taxes,

10 years after the date of sale; or

•

those benefits; or

the amount entered on Part I,

The date on which the final payment

•

Any portion of the fund that reverts to

line 5a is the amount realized on

is made if acquisition indebtedness was

the benefit of the employer.

the disposition of qualified securities

incurred at the time of sale.

multiplied by 10%. Also check the

Enter on line 4 the total amount of

The employer sponsoring the plan,

appropriate box on line 5b.

the disqualified benefit.

or the eligible worker-owned

Line 6. Section 4979A — Tax on

cooperative, is responsible for paying

Line 5a and 5b. Section 4978 — Tax

Certain Prohibited Allocations of

on Certain ESOP Dispositions.

the tax.

Qualified ESOP Securities. Section

Section 4978 imposes an excise tax on

Prohibited allocations of

4979A imposes a 50% excise tax on

dispositions of securities acquired in a

securities in an S corporation.

allocated amounts involved in:

sale to which section 1042 applied, or

in a qualified gratuitous transfer to

1. A prohibited allocation of qualified

Generally, the prohibited

which section 664(g) applied, if the

securities by any ESOP or eligible

allocation rules for securities in

dispositions take place within 3 years

worker-owned cooperative.

an S corporation are effective

CAUTION

after the date of the acquisition of

2. An allocation described in

for plan years beginning after

qualified securities (as defined in

section 664(g)(5)(A). Section

December 31, 2004; however, these

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Instructions For Form 5330 - Internal Revenue Service Page 4

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