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Was election to defer timely?


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In November, 1999, Employer approached Employee A and offered Employee A the opportunity to defer a significant portion of his 1999 compensation to a future date. If Employee A agreed to the deferral, Employer would triple deferral and use to purchase stock options for Employer's publicly traded stock. Employee agreed to the deferral, signed election in 11/99 and now owns stock options. Question: Was initial election to defer 1999 compensation timely made or was Employee A already in constructive receipt of the income at the time of the election.

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You may not have deferred compensation at all. Your facts are a bit sketchy, but if the employee simply traded potential pay for stock options, the employee may simply have opted to take pay in the form of stock options. In that case the value of the options may be included in in 1999 compensation. I say "may" because the outcome depends on a lot of things, including characteristics of the options.

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