Jump to content
Sign in to follow this  
Guest Salvador A Mander

Constructive Receipt

Recommended Posts

Guest Salvador A Mander

Plan states that employee who is president and sole shareholder of solvent company may elect to receive $5,000 this year or upon separation from services, as an award for prior services performed.

Is this a deferred comp plan with a prohibited acceleration clause, or is it NOT a deferred compensation plan because it's constructively received simultaneous with the establishment of the plan?

In other words, is it possible to have a deferred compensation plan where the amount to be paid is undoubtedly constructively received when the plan was created?

A strict reading of 1.409A-1(b) suggests that it is possible (focuses on payment, not timing of taxable income; see also preamble at 19235, third column). However, another sentence in that section may indicate otherwise: "A LBR to an amount that will be excluded from income when and if received does not constitute a deferral of compensation[.]"

I read this language as NOT suggesting that amounts which can be paid in a later year but which are incapable of being tax-deferred escape section 409A.

Does anyone agree or disagree?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...