Save time with our cheat sheets, fact sheets, checklists & books!

February 23, 2009

Golden Parachute Payments

Your Guide

Print

Definition

Also referred to as Income Averaging

Any payment in the nature of compensation to (or for the benefit of) a disqualified individual if_

  1. The  payment is contingent on a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, and
  2. The aggregate present value of the payments in the nature of compensation to (or for the benefit of) such individual which are contingent on such change equals or exceeds an amount equal to 3 times the base amount.

The term “base amount” means the individual’s annualized includible compensation for the period consisting of the most recent 5 taxable years ending before the date on which the change in ownership or control occurs (or such portion of such period during which the disqualified individual performed personal services for the corporation).

Referring Cite

IRC § 280G

Additional Helpful Information

  • For purposes of ‘2’ above, certain payments not treated as parachute payments under paragraph are not taken into account. Golden parachutes are often used to discourage takeovers by increasing the cost of acquisition of the company
More

Keep Learning

Domestic abuse distribution

A domestic abuse distribution is one that is made to domestic abuse victim, during the 1-year period beginning on any date on which the individual

Eligible retirement plan

The term “eligible retirement plan”, means a retirement plan to which a rollover contribution can be made. These are: (i)an individual retirement account described in

Qualified See-Through Trust beneficiary

Definition A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Be among the first to know when

IRA Rules
Change