Merger of two companies is change in ownership or control for one but not the other for golden parachute purposes

Article Abstract:

The IRS has ruled that, in a merger of two companies, one of the two underwent a change of ownership for golden parachute purposes, but not the other. A stock-for-asset exchange caused the company offering its stock to undergo a change of ownership, as it had transferred over 50% of its control to a new company. The combined stock of the companies in the hands of the other company, however, did not leave the new company with a majority share of power, and therefore no change of ownership had occured for this second company, even though it had given up all of its assets.

Analysis, Acquisitions and mergers

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Sale of wholly-owned subsidiary is not a change in ownership or control triggering the golden parachute rules even where parent corporation is sold within same calendar year

Article Abstract:

The IRS in Letter Ruling 9847011 determined that employee compensation linked to ownership changes of the employer business did not fall within IRC section 280G and IRS regulation section 1.280G-1, Q & A-22(b). Section 280G treats such compensation as taxable and denies employers the deduction for compensation paid. The ruling concerned the sale in the same calendar year of a subsidiary and subsequently of its parent.

United States, Employee Benefits & Services, Laws, regulations and rules, Affiliated corporations, Human resource management, Influence, Contracts, Employee benefits, Business sale

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Present value of annuity determined for purposes of golden parachute rules

Article Abstract:

A parachute payment is taxable if the aggregate present value of the compensation made in relation to the change of control of the employer is equal to or greater than three times a certain base amount. The present value of the annuity is calculated on the date of the change of control. The Applicable Federal Rate 120% of the long-term rate during the month in which the change of control of the employer occurred.

Methods, Taxation, Accounting and auditing, Annuities, Present value

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