McDermott, Will & Emery has published this article: “Ninth Circuit Case Creates Deduction Opportunity for Companies with ESOPs.” The article discusses this case: Boise Cascade Corp. v. U.S., No. 01-36086 (9th Cir. 5/20/2003), in which the Ninth Circuit held that payments made by a corporation to redeem shares of its stock held in an Employee Stock Ownership Plan (“ESOP”) and distributed by the ESOP to participants were deductible under section 404(k) of the Internal Revenue Code (the “Code”). The holding was directly contrary to an IRS holding in Rev. Rul. 2001-6 that, under Code section 162(k), a corporation could not deduct amounts paid or incurred in connection with the redemption of its stock.
McGuire Woods LLP also has this report on the case and makes the point “that dividends that are deductible under Code section 404(k) cannot be rolled over to IRAs by participants.”