409A Scuttles Silicon Valley Deal

Experts concluded that valuation needs to reflect the implied value of preferred equities.

Deal Salvaged With Help from 409A Appraiser - from Teknos HERE

409A Forces Facebook to Value Itself ($35 Billion?)

"Prior to the enforcement of IRC 409A, many companies might have used a default discount such as 80% for the pricing of options. These days with IRC 409A in place, the companies now have to “show their work” when pricing these options. With that being said, we have reviewed numerous option filings by Facebook, and some of those prices of the common listed on these typically fell within a 75% to 80% discount as to the most recent round of Preferred Stock that had been issued."


Article from Clusterstock HERE

More on 409A Corrections - Cracking the Code

Presentation from Ivins, Phillips & Barker to DC Bar Tax Section on making corrections OUTSIDE of IRS Formal Programs: "409 Failures: Correcting Outside of the IRS's Formal Correction Programs" HERE

Flashback: Is it permitted to correct 409A failures outside of formal IRS programs? Lawyers say "yes." See Rosina B. Barker & Kevin P. O’Brien (both of Ivins, Phillips & Barker, Washington, D.C.) have published 409A Failures: Correcting With and Without Notice 2008-113, 124 Tax Notes 557 (Aug. 10, 2009).

"We suspect these will be legion. The IRS might not think that correction outside the notice is permitted. If this is their view, we do not agree. The IRS’s narrow view appears based on the notice’s underlying and, we believe, mistaken theory of § 409A. We set forth a better view of § 409A, one more consistent with the statute and regulations, and based on traditional concepts of income receipt. On the basis of this preferred view, we explore how § 409A operational failures might be corrected using rescission doctrine, the longstanding rule of Couch v. Commissioner, and other theories of income receipt derived from the case law. The difference between these two opposing theories of § 409A will underlie this and no doubt other disputes about § 409A compliance and administration for years to come."

"409A is not Horseshoes" - IRS Will Audit Wall Street Payouts

"The U.S. Internal Revenue Service is taking a look at compensation plans that hold a lot of the big money Wall Street firms pay out to executives. Major accounting firms and tax attorneys are instructing firms on how to prepare for a wave of audits they expect for deferred compensation plans. Executives themselves face stiff tax penalties when employers run afoul of the rules. Susan Lennon, managing director of the human resources service group at PricewaterhouseCoopers LLP, predicts that IRS audits of deferred compensation plans will increase in "number and scope."

Section 409A went into full swing last year and the tax authority apparently wants to make sure employers are obeying it. There is still a lot of confusion on the part of companies and their tax advisors over how to comply. Nonetheless, an audit is a "very binary" process, according to Hogans. "This is not horseshoes," he said. "Close does not count, as a matter of pure legality.""

Article from Financial Advisor Magazine HERE