ESOP is a qualified stock bonus plan, or a stock bonus and a cash purchase plan, both qualified under Section 401(a) and designed to invest primarily in qualified employer securities; and Section 409 Qualifications for Tax Credit Employee Stock Ownership Plans. ESOPs fall under IRC Section 401, Qualified Retirement Plan, Profit Sharing, and Stock Bonus, and the IRC 501 Exemption from Corporate Tax, Certain Trusts, etc., which has 15 and 16 paragraphs, respectively, and a number of subsections in each. This is undoubtedly one of the longest regulations with a number of sub-paragraphs. Section 401(a) addresses the standards necessary to meet qualification, the contribution limit for employee-owners, and cash or deferred arrangements, to name a few. Under IRC Section 501(a), the trust that holds the ESOP stock is treated as a tax-exempt trust. Profits allocated to shares held by an ESOP are not taxable at the trust level. A plan cannot be considered an ESOP if it does not meet the requirements of IRC Section 409. This is especially true if a put option is not available for an ESOP. employee as required in section 409(h). Section 409(o) provides distribution and payment requirements. There are also regulations about S Corps owning ESOPs in section 409(p). This regulation aims to not allow distributions to disqualified persons such as family members and individuals who own