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Tax Law Roundup current law developments in U.S. taxation

Category Archives: Compensation

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IRS Curtails Profits Interests In Lieu of Management Fees and More

Posted in Capital Gain, Compensation, Funds, Partnership/LLC

The IRS issued the much anticipated proposed regulations that severely curtail the practice of a fund manager waiving management fees in exchange for a share of future partnership profits. In essence the regulations tighten the necessary “entrepreneurial risk” required of the future profits interest plus list five other negative factors for recasting the profits interest… Continue Reading

IRS Eliminates Requirement to File Copy of Section 83(b) Election with Tax Return

Posted in Compensation, Partnership/LLC, Procedure

In an effort to improve e-filing, the IRS has proposed to eliminate the need to file a copy of a Section 83(b) election with the service provider’s annual tax return. Taxpayers receiving non-vested stock or partnership interest often file a Section 83(b) election within 30 days of receipt to treat the equity as vested for… Continue Reading

IRS Addresses Interaction of Performance Compensation and $1M Compensation Deduction Cap

Posted in Compensation, Tax

The IRS recently issued final regulations under Section 162(m), which limits a public company’s deduction of executive compensation in excess of $1M.  The Section 162(m) limits do not apply to performance-based compensation that meets certain qualifications.  These final regulations released on March 30 solve two important riddles for practitioners: Per-Employee Limitations – To avoid the… Continue Reading

Final Regulations Clarify Timing of Compensation For Restricted Equity

Posted in Compensation, Deferrals, General, Stock Awards, Substantial Risk of Forfeiture

New IRS final regulations address when a service provider (employee) can defer income for compensatory equity that is subject to a “substantial risk of forfeiture”.  Section 83 allows service providers to defer taxation on the transfer of property in connection with the performance of services until the earlier of when the property (a) is no longer… Continue Reading

Senate issues 8th Tax Reform Paper: Types of Income and Business Entities

Posted in Compensation, Debt vs. Equity, Financial Products, Legislative, REITs, S corporation, Tax reform

The Senate Finance Committee issued its 8th tax reform paper, discussing the tax treatment types of income (e.g., ordinary, wages, capital gains) and business entities (e.g., C corporations, pass-throughs, RICs, and REITs).  The report also addresses the disparate treatment between debt and equity and financial product reform.  For pdf version click here.  This follows the… Continue Reading

Long-Awaited Regulations Issued on New 3.8% Net Investment Income Tax

Posted in Compensation, General, Partnership/LLC, Passthrough Entity, Real Estate

The IRS issued long-awaited proposed regulations and related FAQ guidance on the new Section 1411 3.8% tax on Net Investment Income.  The 3.8% Medicare tax is part of the tax provisions in the Affordable Care Act to pay for health care reform.  The IRS also issued proposed regulations and FAQs on the related Section 1401… Continue Reading

IRS Provides Sample 83(b) Election and Related Examples

Posted in Compensation, Corporate, Partnership/LLC

The IRS published new Rev. Proc. 2012-29, to provide both a sample election under section 83(b) and examples of the income tax consequences of making such an election with respect to compensatory stock.  It is common for a partnership or corporation to issue equity-based compensation to an employee subject to vesting and transfer restrictions.  In… Continue Reading

Proposed Regulations Address Section 83 Timing of Compensation

Posted in Compensation, General

The IRS issued new proposed regulations on the timing of taxable compensation upon the transfer of property to a service provider (e.g., compensatory stock or partnership interest).  In general, section 83 taxes the receipt of property in connection with the performance of services “in the first taxable year in which the rights of the person… Continue Reading