Final answer:
The statement that a corporation makes after-tax contributions to a trust on behalf of its employees in a leveraged ESOP is false. Leveraged ESOPs involve borrowing money to purchase shares, which the company repays with pre-tax dollars. The correct answer is b. false.
Step-by-step explanation:
In a leveraged ESOP (Employee Stock Ownership Plan), the corporation does not make after-tax contributions to a trust on behalf of its employees. Instead, the ESOP borrows money to buy company shares, and the corporation repays the loan with pre-tax dollars. Therefore, the statement is false. Leveraged ESOPs allow companies to borrow cash while also providing an employee benefit by gradually transferring ownership to employees as the debt is repaid.
In a leveraged ESOP, the corporation makes after-tax contributions to a trust on behalf of its employees.
The correct answer is b. false.
In a leveraged ESOP, the corporation takes on debt to make contributions to the trust on behalf of its employees. These contributions are typically tax-deductible for the corporation. The trust then uses the contributions to purchase employer stock, which is allocated to employees' accounts based on their compensation or some other predetermined formula.