The only explicit statutory opportunity to resolve these issues is in the context of the offshore trust funding provisions, if either substantially all the benefited services are foreign or the situation is ultimately determined in regulations not to "improperly" defer
In general, a plan is considered to defer
an item of compensation if the (1) service provider has--either by means of providing services or otherwise--a legally binding right to the funds during the current tax year and (2) compensation is payable in a subsequent tax year.
Under this rule, the initial election to defer
performance-based compensation, based on services performed over a period of at least 12 months, must be made at least 6 months before the end of the service period.
EDC plans allow top management to defer
income tax on current compensation, including bonuses.
The Committee is aware of the popular use of deferred compensation arrangements by executives to defer
current taxation of substantial amounts of income.
Employees eligible for both plans can defer
up to 6 percent of their eligible compensation into the savings plan, but they can defer
up to 20 percent to the deferred-compensation plan.
The FASB method would defer
pension income, which is not considered income under section 61.
After you determine (or estimate) the lowest tax, your payment strategy should defer
any cash outflows as long as possible without incurring interest or penalties for late payment.
When 401 (k) plans were introduced in 1984, most executives took full advantage of the opportunity to defer
current income (then taxed at marginal rates of over 50%) into the future, usually until retirement, when tax rates were expected to be much lower.
Specifically, to defer
taxation to the employee of the promised but unpaid sums, a nonqualified deferred compensation plan must comply with the separate but related tax doctrines of constructive receipt and economic benefit.