CONGRESSIONAL CLARIFICATION OF ESTATE TAX DEDUCTION FOR SALES OF EMPLOYER SECURITIES.

SEC. 10411. CONGRESSIONAL CLARIFICATION OF ESTATE TAX DEDUCTION FOR SALES OF EMPLOYER SECURITIES. (a) Intent of Congress in Enacting Section 2057 of the Internal Revenue Code of 1986.— Section 2057 (relating to sales of employer securities to employee stock ownership plans or worker-owned cooperatives) is amended by redesignating subsections (d), (e), and (0 as subsections (e), (f), and (g), respectively, and by inserting after subsection (c) the following new subsection: “(d) Qualified Proceeds From Qualified Sales.— “(1) In general.— For purposes of this section, the proceeds of a sale of employer securities by an executor to an employee stock ownership plan or an eligible worker-owned cooperative shall not be treated as qualified proceeds from a qualified sale unless— “(A) the decedent directly owned the securities immediately before death, and “(B) after the sale, the employer securities— “(i) are allocated to participants, or “(ii) are held for future allocation in connection with— “(I) an exempt loan under the rules of section 4975, or “(II) a transfer of assets under the rules of section 4980(c)(3). “(2) No substitution permitted.— For purposes of paragraph (1)(B), except in the case of a bona fide business transaction (e.g., a substitution of employer securities in connection with a merger of employers), employer securities shall not be treated as allocated or held for future allocation to the extent that such securities are allocated or held for future allocation in substitution of other employer securities that had been allocated or held for future allocation.” 101 STAT. 1330–433 (b) Effective Date.— The amendments made by subsection (a) shall take effect as if included in the amendments made by section 1172 of the Tax Reform Act of 1986.