STEP 1. First you have to download Seas0nPass and then launch it.
STEP 2. In order to build your own custom jailbroken 4.2.1 firmware for Apple TV simply you have to select “Create IPSW” option.
STEP 3. Now Seas0nPass will download all the required files for creating custom firmware.
STEP 4. When Seas0nPass will prompt you, using a micro USB cable connect your Apple TV. Now you have to hold down both the ‘PLAY/PAUSE’ and ‘MENU’ buttons for 7 seconds.
STEP 5. Now iTunes will open automatically in order to start the restore process.
STEP 6. After some time iTunes will confirm the restore when complete.
That’s it. Now your Apple TV is jailbroken untethered on iOS 4.2.1. Now simply connect the HDMI cable and remove the USB cable. You can download Seas0nPass for Mac OS X from here. You can download iOS 4.2.1 for Apple TV from here.