Avoiding Traumatic ESOP 1042 Election Distress

Medical scientists have identified a disorder, known as Traumatic 1042 Election Distress, that can afflict business owners who pursue Section 1042 sales of their company stock to an ESOP. The researchers(1) recently concluded their clinical study, based on observations of hundreds patients over the past 30 years. Their newly published findings identify common stress patterns observed among business owner patients. The disorder is curable if diagnosed early.

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Learn to recognize these symptoms:

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The Six Stages of Traumatic 1042 Election Distress

  1. Overwhelmed: “There is so much complexity in forming an ESOP. I need to focus on one thing at a time. After all, I have 12 months to figure out my 1042 rollover options;”
  2. Denial: “QRP seems simple enough. I should be able to recognize a ‘domestic operating company’ when I see one. Nothing to worry about.”
  3. Anger: “Floating rate notes are the recommended option?(2) I have to buy them and then borrow against them to get at my money? You’ve got to be kidding me!”
  4. Fear and Worry: “What if I wake up one day and realize the bonds are never going up in value? What if the issuer goes bust or else redeems the bonds before I am gone? What if I get a margin call?
  5. Hope: “Maybe if I follow my stock broker’s advice and monetize these bonds, he can reinvest the money, beat the market and earn back what I left on the table!”
  6. Stress and Anxiety: “How much money am I leaving on the table? There must be a better way—Call 9-1-1!!
  7. Depression: “Still, I suppose it’s better than recognizing capital gains. I hope I don’t outlive my bond’s maturity date! Why doesn’t this sit well with me?”

If you or someone you know is suffering symptoms such as these, then get a second opinion. Alpha Architect has a track record of treating business owners who suffer from traumatic 1042 election distress, typically resulting in full patient recoveries. We have pioneered a low-cost, passive equity index alternative to floating rate notes that is designed to optimize the after-tax, after-fee returns that can be achieved through a 1042 rollover. Contact a trained professional today (ask for Doug). We believe that for all the good that you are doing for your employees and communities, you should also do well for yourself.

Here is a simple outline of our 1042 solution.

Surgeon General Warning: Any 1042 QRP rollover strategy that is contingent on the investor suffering an early demise in order to achieve his estate planning goals can be hazardous to your health, your wealth or both.

Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.

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Definitions of common statistics used in our analysis are available here (towards the bottom)


1. We are Alpha Architect, an independent financial advisor (i.e., fiduciary) to several ultra-high-net-worth family offices, and investment manager of five publicly traded ETFs.
2. The National Center for Employee Ownership (NCEO), perhaps the nation’s most widely respected source for unbiased information and research on ESOPs, recently published an article titled Red Flags in ESOP Transactions, in which the authors call attention to the ‘Inappropriate Use of Floating Rate Notes’

Article by Doug Pugliese, Alpha Architect