How to compensate close corporation owners without violating nondiscrimination rules
Article Abstract:
The structuring of compensation packages for the owners of a closely held corporation is difficult because of the different types of compensation that can be selected, some fully taxable, some partially taxable, some tax-deferred, and some nontaxable to owner-employees. Taxable items can be taxed at ordinary rates, long-term capital gain rates, or using special rates, such as ten-year forward averaging. Those elements of an overall compensation plan that require broad employee coverage, such as retirement plans, insurance plans, and qualified deferred compensation, as well as those that do not are discussed, and the deductibility of automobiles used by employees, employer-sponsored health, pension and profit sharing plans, and deferred compensation are described.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1986
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Redesign of a qualified plan may prove more beneficial than its termination
Article Abstract:
Recent changes in tax regulations have forced many businesses to decide whether to redesign their qualified retirement plans. Some want to reduce expenses due to uncertain future business prospects, others experiencing continued profit growth are looking for alternative ways to continue to shelter taxable profits through qualified plans at the pre-TEFRA levels, and others have found that continued maintenance of a qualified plan program is marginal because of their growing complexities. The primary impact of these changes will be felt by highly compensated employees and small corporations sheltering the maximum limits in their plans. Overfunded plans, reduced funding, combination plans, plan terminations, and decreased plan costs are described.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1986
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Failure to meet nondiscrimination test will result in inclusion of fringe benefits
Article Abstract:
A nondiscrimination test is imposed on three types of otherwise-excludable fringe benefits by new Temporary and Proposed Regulations on fringe benefits retroactive to January 1, 1985: no-additional-cost service (one provided by an employer to an employee that is for sale to customers, does not cost the employer, or is received by an employer other than the employee's employer in the same line of business); qualified employee discount (one which is provided to employees at a reduced rate than is paid by the general public); and an employer-operated eating facility (one whose revenue equals or exceeds its direct operating costs). Instances in which fringe benefits pass and do not pass the nondiscrimination test are described.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1986
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