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dated October 11, 2000. The second amended tax return computed
the same amount of tax owed as the amended tax return but
differed from the amended tax return by the attachment of a
statement of election under section 1042 predated to March 4,
1997, a statement of consent from the company consenting to the
application of sections 4978 and 4979A predated to March 4, 1997,
and a statement of petitioner’s purchase of qualified replacement
property predated to March 2, 1998.
OPINION
Section 1042 provides, generally, that a taxpayer may elect
to defer recognition of the gain from a sale of stock to an ESOP
in certain circumstances. In relevant part, section 1042
provides:
SEC. 1042(a). Nonrecognition of Gain.--
If–-
(1) the taxpayer or executor elects in such form
as the Secretary may prescribe the application of this
section with respect to any sale of qualified
securities,
(2) the taxpayer purchases qualified replacement
property within the replacement period, and
(3) the requirements of subsection (b) are met
with respect to such sale,
then the gain (if any) on such sale which would be
recognized as long-term capital gain shall be recognized
only to the extent that the amount realized on such sale
exceeds the cost to the taxpayer of such qualified
replacement property.
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Last modified: May 25, 2011