Assignment of NQDC to Revocable Trust

[Guest woodchuck]

Can an employee who has a NQDC account assign the right to receive payment upon his termination to the trustee of his revocable trust and avoid having to pay income taxes at the time of termination? I thought that giving the right to assign NQDC benefits gives rise to constructive receipt/economic benefit issues but I haven't found clear authority in that regard. Does anyone have a cite to a Revenue Ruling or other authority?

[Guest L337pwner5]

It seems like the assignment of income (Lucas v. Earl, I think...) doctrine would prevent the participant from shirking his tax bill. He could assign his right to receive the distribution, I would think, just like I can gratuitously assign to you my right to receive $50 on a note from a customer. Even if it doesn't generate taxable income to me immediately when I transfer the note, when the customer pays you back the $50 bucks he owed on the note, I would be taxed on that $50. But then again, when trusts get involved, weird stuff can happen.

So my take would be: employee is not taxed under the constructive receipt/economic benefit doctrine when he assigns, but when he terminates, he is taxable just the same as if the amount had been paid directly to him rather than the trust.

Also, taxes are the price we pay to live in a civilized society. Employee should not be attempting to avoid paying his fair share.

[Guest Kabert]

"Also, taxes are the price we pay to live in a civilized society. Employee should not be attempting to avoid paying his fair share. "

Wait a minute there pal. You're talkin' smack in these circles with a comment like that.

[QDROphile]

Please tell us more about "these circles."

[Guest mjb]

Can an employee who has a NQDC account assign the right to receive payment upon his termination to the trustee of his revocable trust and avoid having to pay income taxes at the time of termination? I thought that giving the right to assign NQDC benefits gives rise to constructive receipt/economic benefit issues but I haven't found clear authority in that regard. Does anyone have a cite to a Revenue Ruling or other authority?

Under what section of the tax law is a revocable trust a separate taxable entity so that the income will not be taxed to the employee?

If the tax law permitted such transfers dont you think that it would be a retirement planning concept that would have been extensively discussed by tax advisors as a way to avoid taxes?