A key advantage of employee stock ownership plans is that the company gets a tax advantage equal to the fair market value of the shares that are transferred to the trustee.

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ESOPs have several advantages. The corporation receives a tax deduction equal to the fair market value of the shares that it transfers to the trustee. It can also claim an income tax deduction for dividends paid on stock the ESOP owns. Employees aren't taxed until they receive a distribution from the trust, usually at retirement when they normally have a reduced tax rate.

A Key Advantage of Employee Stock Ownership Plans Is That