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Good News! New 409A Regulations (Yes, Really!) – Part 5: If it Ain’t Broke, Don’t Fix It (and Other Minor Changes)

August 2, 2016

Authors

Chris Rylands and Katharine Finley

Good News! New 409A Regulations (Yes, Really!) – Part 5: If it Ain’t Broke, Don’t Fix It (and Other Minor Changes)

August 2, 2016

by: Chris Rylands and Katharine Finley

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

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Good News! New 409A Regulations (Yes, Really!) – Part 4: Getting Paid

July 27, 2016

Authors

Chris Rylands and Katharine Finley

Good News! New 409A Regulations (Yes, Really!) – Part 4: Getting Paid

July 27, 2016

by: Chris Rylands and Katharine Finley

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Read More

Good News! New 409A Regulations (Yes, Really!) – Part 3: Don’t Fear the (409A) Reaper

July 20, 2016

Authors

Chris Rylands and Katharine Finley

Good News! New 409A Regulations (Yes, Really!) – Part 3: Don’t Fear the (409A) Reaper

July 20, 2016

by: Chris Rylands and Katharine Finley

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Read More

Good News! New 409A Regulations (Yes, Really!) – Part 2: Taking (and Giving) Stock

July 13, 2016

Authors

Chris Rylands and Katharine Finley

Good News! New 409A Regulations (Yes, Really!) – Part 2: Taking (and Giving) Stock

July 13, 2016

by: Chris Rylands and Katharine Finley

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Read More

Good News! New 409A Regulations (Yes, Really!) – Part 1: Firing Squad

July 7, 2016

Authors

Chris Rylands and Katharine Finley

Good News! New 409A Regulations (Yes, Really!) – Part 1: Firing Squad

July 7, 2016

by: Chris Rylands and Katharine Finley

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.

The changes are legion,

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409A – Is Your Compensation Arrangement Subject to These Rules?

August 12, 2013

Authors

Brian Berglund

409A – Is Your Compensation Arrangement Subject to These Rules?

August 12, 2013

by: Brian Berglund

The 409A rules do not provide a clear roadmap to determine what compensation arrangements are subject to their regime of requirements and restrictions.  In this brief video, Brian Berglund provides a description of the approach you should take to evaluate whether your compensation arrangement should be structured to comply with the 409A rules regarding deferral elections, timing of payments and other requirements.

(You can also view the video by going here.)

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He Fought the Law, and 409A Won

March 14, 2013

Authors

Chris Rylands

He Fought the Law, and 409A Won

March 14, 2013

by: Chris Rylands

In this recently reported case, one Dr. Sutardja, a recipient of an allegedly discounted option, sued to recover 409A taxes imposed by the IRS.  The case does not decide whether the option was discounted, but Dr. Sutardja argued that his option, even if discounted, shouldn’t be subject to 409A.

Essentially, he tried to argue that (1) the grant of the discounted option is not a taxable event, (2) stock options aren’t “deferred compensation,” (3) he didn’t have a legally binding right until he exercised the option, or (4) 409A couldn’t apply to the discounted option.  Those familiar with 409A will sigh upon reading the list since clearly none of these arguments holds any water.  Discounted options are subject to 409A and must have fixed dates for exercise and payment.

The interesting part of the case, though, was the government arguing that Dr. Sutardja did not have

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Common 409A Misconceptions

July 24, 2012

Authors

benefitsbclp

Common 409A Misconceptions

July 24, 2012

by: benefitsbclp

Every 409A attorney knows the look. It’s a look that is dripping with the 409A attorney’s constant companion – incredulity. “Surely,” the client says, “IRS doesn’t care about [insert one of the myriad 409A issues that the IRS actually, for some esoteric reason, cares about].” In many ways, the job of the 409A attorney is that of knowing confidant – “I know! Isn’t it crazy! I can’t fathom why the IRS cares. But they do.”

There are a lot of misconceptions out there about how this section of the tax code works and to whom it applies. While we cannot possibly address every misconception, below is a list of the more common ones we encounter.

I thought 409A only applied to public companies. While wrong, this one is probably the most difficult because it has a kernel of truth. All of the 409A rules apply to all companies, except one.

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Facebook and 409A: When $300 Million Isn’t Enough

May 22, 2012

Authors

benefitsbclp

Facebook and 409A: When $300 Million Isn’t Enough

May 22, 2012

by: benefitsbclp

On May 18th, two famous, photogenic Olympians found themselves almost $300 million richer. A banner day for anyone, and yet they may have felt at least a twinge of regret. Why? They contend that 409A should have made them much richer, to the tune of as much as $1.2 billion.

At this point, Hollywood has made the story almost old-hat. In December 2002, then Harvard students Tyler and Cameron Winklevoss had an idea. They would develop a web site that connected Harvard students. If successful, they would expand the concept to other campuses. In November of 2003, after several false starts, the Winklevoss twins retained the services of a young, talented programmer to implement their vision. Three months later, without the knowledge of the Winklevoss twins, Mark Zuckerberg gave birth to Facebook. After a successful run at Harvard, the social networking site spread to other campuses, and then took over

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Five Common 409A Design Errors: #5 Payment Periods Longer than 90 Days

April 4, 2012

Authors

benefitsbclp

Five Common 409A Design Errors: #5 Payment Periods Longer than 90 Days

April 4, 2012

by: benefitsbclp

This post is the fifth and final post in our benefitsbclp.com series on five common Code Section 409A design errors and corrections. Go here, here, here, and here to see the first four posts in that series.

Code Section 409A abhors discretion. One concern with discretion is that it could lead to the type of opportunistic employee action or employer/employee collusion that hurt creditors and employees during the Enron and WorldCom scandals.

Another concern is that discretion could be used opportunistically to affect the taxation of deferred compensation. Consider an employment agreement with a lump-sum payment due at any time within thirteen months following a change in control, as determined in the employer’s discretion. This provision would permit the employer to pick the calendar year of the payment. Because non-qualified payments are generally taxable to the recipient when paid, this type

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