The IRS has concluded that an S corporation’s employee stock compensation plan didn’t create a second class of stock. In a Private Letter Ruling (PLR), the tax agency determined that, in this case, the transfer and repurchase restrictions on the plan’s shares were disregarded when determining whether the shares awarded under the plan had identical rights to other stock issued by the S corporation. Under the U.S. tax code, a domestic corporation may elect to be taxed as an S corporation. To qualify for this election, the corporation must, among other things, have only one class of stock. (PLR 201918013)
