Nonqualified plans can avoid limits on deferred comp

Article Abstract:

The use of nonqualified deferred compensation is increasing in response to the restrictions on executive participation in qualified retirement plans. Nonqualified deferred compensation plans are an attractive alternative because it allows deferment of income until retirement, boosts employee motivation and commitment and encourages executives to protect the assets of the company. Furthermore, they can be exempted from Titles I and II of ERISA. In using a non-qualified plan to defer compensation, employers should make sure that there is no constructive receipt of income and receipt of economic benefit. Risk can also be minimized if the plan is unfunded, the right to receive deferred compensation is nontransferable, and compensation to be deferred is not determinable. Popular forms of nonqualified deferred compensation plans include Supplemental Executive Retirement Plans, excess benefit plans, and elective deferral plans.

Evaluation, Deferred compensation

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Deduction for stock redemption loan fees is unsettled

Article Abstract:

Courts have reached conflicting conclusions regarding the deductibility of stock redemption loan fees. In deciding on 'Kroy (Europe) Limited,' the Ninth Circuit allowed the taxpayer to deduct loan fees in connection with a stock redemption. However, the Tax Court ruled in 'Fort Howard' that deductions for similar fees incurred in a redemption are not permitted. Therefore, there are no clear guidelines for ascertaining if redemption stock loan fees are deductible. To lessen their vulnerability to undesirable tax treatment, taxpayers can request their advisers and financial institutions to create itemized bills for all steps required in a stock redemption. The 'Kroy' case should be used as a guide by taxpayers who want to make deductions but are worried about penalties under Sec. 6662. Those who are not that confident about 'Kroy' may disclose details of their stock redemption transactions on Form 8275.

Stocks, Loan servicing

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Filing separately can provide tax savings for many couples

Article Abstract:

It is not always advantageous for married couples to file a joint income tax return even though joint filing could lower their tax liabilities. Normally, a joint return can only be filed if both spouses agree. In addition, the married couple must both be US citizens or resident aliens and must have the same tax years, unless the discrepancy in their tax years resulted from the death of one or both spouses. However, a taxpayer who is qualified to file a joint return may not want to do so, such as in cases when the spouse has unpaid taxes, involved in illegal or suspicious activities, or simply prefers to have separate finances, to avoid the joint and several joint liability for taxes owed on a joint return. Married taxpayers considering filing separate returns need to examine each aspect of the tax return, including deductions, income, adjustment to income, exemptions and credits .

Tax Law, Public Finance Activities, Analysis, Married people, Joint tax returns

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