MaryK4
Expert Alumni

Retirement tax questions

Code U

 

If the stock in the ESOP has been allocated to the plan participants, the income is dividend income to the recipient.  If the ESOP allocates shares to each eligible employee every year, giving employees an increasing ownership stake as they gain seniority. The ESOP distributes these shares to employees to fund their retirement.

 

If the stock in the ESOP has not yet been allocated to the plan participants, the income is compensation to the recipient. 

 

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