Ezel / IRS Rulings / 201204010

CCA 201204010: Counsel discusses deductions for ESOP stock redemptions

Number
201204010
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Stock Reacquisition Expenses
Topics
Retirement plans, IRAs, and annuities Income and deductions
Code sections
§ 404, § 162, § 6110
Ruling dated
March 4, 2011
Publicly released
January 27, 2012
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2012, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2012
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel discussed whether a taxpayer could deduct the redemption of stock held by its employee stock ownership plan. The advice notes that the 2006 regulations did not apply to deductions arising before their effective date. It also states that the Service had prevailed in cases involving similar redemptions, with the courts upholding the position that IRC § 162(k) barred corporations from deducting those stock redemptions. The memorandum further notes that the Supreme Court denied certiorari in Nestle Purina.

Ruling snapshot

  • Question: Whether a corporation may deduct redemptions of stock held by an ESOP.
  • Outcome: advice given
  • Key authorities: IRC §§ 162(k), 404, and 6110(k)(3); 2006 regulations; Nestle Purina, General Mills, Inc., and Conopco cases referenced in the document.

Full text (IRS public release)

ID: CCA-341111-11 Number: 201204010
Release Date: 1/27/2012
Office: ------------------
UILC: 404.00-00, 162.34-00

From: ----------------
Sent: Friday, March 4, 2011 11:59 AM
To: -------------------
Cc: --------------------------------------------------------------
Subject: Taxpayer that is still deducting the redemption of stock held by its ESOP

-------

I will be glad to discuss your case further when we set up a call with us. Let me know if you would like me to set up the call. Do you have an attorney in --------assigned to the case? It would be good to include him or her.

I just wanted to point out in the meantime that the taxpayer is correct that the 2006 regulations would not apply to deductions before the effective date of the 2006 regulations; however, the Service won two cases in the 8th Circuit, Nestle Purina and General Mills, Inc., and one in the 3rd Circuit, Conopco, upholding Service position that the corporations are barred by 162(k) from taking deductions for redemptions of stock of ESOPs. I have attached the cases. Furthermore, the Supreme Court denied certiorari in Nestle Purina at 131 S.Ct. 86 (2010).

Please feel free to call me if you have any questions.

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