Terminating the Six-Month Delay Rule for Severance Pay
5 Pages Posted: 12 Jan 2011
Date Written: July 16, 2007
Section 409A of the Internal Revenue Code for the first time comprehensively codifies the rules governing the federal income taxation of nonqualified deferred compensation. Compensation subject to section 409A that does not comply with the rules is subject to Draconian penalties. The author argues that there is a straightforward and internally consistent interpretation of Section 409A under which the requirement that there be a six-month delay in the case of certain deferred compensation from a public company does not apply to ordinary-course severance, and that this result should be viewed as neither controversial nor aggressive.
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