CCA 200928035: Annual periodic payments create an excess-benefit transaction at year-end

Plain-English summary

Chief Counsel addressed when an excess-benefit transaction occurs for limitations-period purposes. When one contractual arrangement provides periodic payments throughout a disqualified person's tax year, the transaction involving the aggregate annual payments occurs on the last day of that year. Counsel thought this rule could apply even if the parties were unsure whether an actual written contract existed. Counsel also noted that services performed in earlier years may be considered when judging whether compensation paid in a later year was reasonable.

Ruling snapshot

• Question: When does an excess-benefit transaction occur for periodic payments, and may prior services support current compensation?
• Outcome: Advice given that the aggregate transaction occurs at year-end and prior services may be considered
• Key authorities: Treas. Reg. §§ 53.4958-1(e), 53.4958-4(a)(1)

Full text (IRS public release)

ID: CCA-102895-08 Number: 200928035

Release Date: 7/10/2009

Office: -------------

UILC: 4958.00-00

From: --------------------

Sent: Tue 10/28/2008

To: ----------------------------

Cc:

Subject: RE: Requested Legal Opinion/Statute of Limitations

See reg 53.4958-1(e) Date of occurrence - where a single contractual arrangement provides for periodic payments over course of the DP's tax year, consider the excess benefit transaction with respect to the aggregate annual payments to occur on the last day of the tax year. I think this would apply even if they are not sure about an actual written contract, etc.

Re: the substance of the T/P's argument in this case, see reg 53.4958-4(a)(1) - in determining the reasonableness of comp paid in one year, services performed in prior years may be taken into account.

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