Friday, July 23, 2010

M&C Spots 457A Trap for Multinational Corps

Multinationals view 457A as irrelevant for US employees serving foreign parents -- this view may cause lost deductions -- should re-evaluate -- M&C ARTICLE HERE.

"Many multinationals have adopted the view that the harsh income inclusion rules of Code section 457A are essentially irrelevant. Basically, this attitude stems from the belief that that the company's US employees providing services abroad to related foreign entities are doing so as employees of a US-based company pursuant to the terms and conditions of a secondment agreement. This article points out that while a secondment agreement, that is properly worded and implemented, may act as an effective shield against Code section 457A, it may also inflict a detrimental blow to the US company's subpart F income. Accordingly, any US company that seconds its employees to related foreign-based entities should re-evaluate that arrangement to assure that it is obtaining the desired tax outcome."

Friday, July 16, 2010

Attorney Ponders the Lebron James Fray and 409A

"As the ink dries on James’ new employment agreement, as well as those of Dwayne Wade and Chris Bosh, the Miami Heat and James’ attorneys will have inevitably contemplated and believed, in good faith, to have satisfied the requirements contained in the statute and in the accompanying regulations."

Article From Fed Tax Developments Blog HERE

Friday, July 9, 2010

Contraversy Developing over 409A Valuations

Some suggest valuation work going to "overseas" appraisers and valuation "chop shops."

Houlihan Lokey says "high profile" enforcment cases may be coming soon.

BVWire News on the story - HERE.

Tuesday, July 6, 2010

CFO's: 409A Valuation is Commodity Service, Care about Price, Not Quality

From BV Wire News - HERE

"“An amazing 67% of survey respondents single out cost as the key factor in making the decision to go forward with a 409A vendor,” writes Davis. Lest we kid ourselves, only 12% of respondents say that “quality” determines their choices. The majority of CFOs still see 409A as a “commodity service, [with] little value derived from the report beyond a compliance checkmark,” Davis says. In fact, the word “evil” was mentioned in 15% of the CFO responses (with only a few adding the qualifier “necessary.”)"

409A Hits Hollywood Workers

Payment amounts deferred and based upon future box office receipts - independent contractor exception to no avail - READ HERE

"The basic problem is that many service providers in the entertainment industry will not qualify under Section 409A’s exclusion for “independent contractors.” In the entertainment industry, agreements often require the talent to provide services in one year in exchange for compensation in a later year based on box office receipts. Absent compliance with the strict requirements of Section 409A, the talent might be required to include income in the year he acted rather than the year he was paid (assuming the payment is not subject to a “substantial risk of forfeiture”). To go one step further, suppose the motion picture is widely successful, leaving the audiences clamoring for a sequel. The actor might then renegotiate his agreement with the production company for a bonus against the contingent payments to be paid under the original agreement. In essence, the movie star has renegotiated his rights to future earnings and accelerated his receipt of amounts previously earned and deferred. Section 409A punishes this type of renegotiation."

Thanks to Roger Royse, Esq.