Revenue – primary goal

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Non discrimination rule – §132(j)(1) – Exclusions under (a)(1) no-additional cost service and (a)(2) qualified employee discount apply to highly compensated employees (officers) only if available to other employees

  • If not available to lower 1/3, middle 1/3 may still exclude. §414(q) defines highly compensated employee.

  • Nixon – Reg. §161-2(d)(1) requires recipient of noncash compensation to include the “fair market value” of such compensation.

    • General rule – ignore special values, what is it worth to particular taxpayer/recipient. Nixon – charge first class ticket.

  • Valuation problems – tough to figure out standard. Objective, subjective, incremental cost? House Ways and Means Committee Report of 1979 says “lowest price at which employee might reasonably have obtained comparable benefit in the same geographical area within a reasonable period of time.” Internet makes this somewhat outmoded.

  • Receipt of property – §83 – deals with property received for performance of services. Property has to be transferable and not subject to substantial risk of forfeiture before it can be taxed.

    • §83(c)(1) – substantial risk of forfeiture if rights to full enjoyment of property are conditioned on future performance of services.

    • §83(c)(2) – transferable only if transferee receives property without substantial risk of forfeiture.

    • Person that performed the services is taxed, even if property when to someone else (like a child).

    • Amount of income is measured at time of taxation. More accurate measurement of income when it appears that taxpayer will be able to keep it.

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