Change of Control & 280GWar Stories?

[TCWalker]

Have you seen situations where a CoC accelerated distribution provision in the NQ plan has paid the benefit and triggered or added to the 4999 excise tax under 280G? Have you seen other nasty CoC provision consequences?

I hear some companies haved paid the benefit, grossed up the executive for excise tax, take the limited deduction, and just move on...wow!

[Guest Harry O]

Many companies gross up the payments and forgo the deduction. You have to remember that the target company is being swallowed and the target executives are likely to be exterminated! Whether or not the buyer is stuck with a big tax bill is not their concern.

The 280G rules should be repealed. They were initially enacted to protect shareholders but, like section 162(m), have morphed into something that now costs shareholders money. I have seen too many 280G horror stories to spend the time discussing on this board!!!!

[mbozek]

Every deal I have ever worked on has provided for payout in the event of a c in c. Most acquirors consider the tax payments to be the cost of doing business and the purchase price is adjusted for the cost of the payments.

[IRC401]

I worked with a number of golden parachute agreements about four years ago. What amazed me was how uniformly poorly they were written. It was as if the authors were trying to generate useless legal fees for interpreting documents that should have been clear from the start. I'm guessing that whoever approved the agreements didn't know or didn't care what was in them or what the cost could be.