Ezel / IRS Rulings / 201104039

CCA 201104039: Advance bonus payments require a bona fide loan analysis

Number
201104039
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Gross Income v. Not Gross Income
Topics
Income and deductions
Code sections
§ 61
Ruling dated
December 8, 2010
Publicly released
January 28, 2011
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2011, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2011
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel identified the central issue in an arrangement involving advances made in anticipation of future employee bonuses: whether the advances were bona fide loans. The advice said the analysis should consider what happens if an employee leaves before repayment, how the arrangement is documented, and what occurs in practice. It identified Revenue Rulings 68-239 and 68-337 as relevant authorities and said the authorities cited in the draft memorandum appeared inapposite. The issue concerns whether the advances should be treated as gross income.

Ruling snapshot

  • Question: Are advances made in anticipation of future bonuses bona fide loans?
  • Outcome: Advice given.
  • Key authorities: IRC § 61; Rev. Rul. 68-239; Rev. Rul. 68-337.

Full text (IRS public release)

ID: CCA_2010120811320215 Number: 201104039
Release Date: 1/28/2011
Office: ------------------
UILC: 61.00-00

From: --------------------
Sent: Wednesday, December 08, 2010 11:32:20 AM
To: ----------------
Cc:
Subject: Advance Bonus Issue

Hi -------, I haven't encountered the issue before. I don't know whether the arrangement is common in the industry but I suspect it is. I think the issue is whether the advances in anticipation of future bonuses were bona fide loans. The rev ruls attached are the relevant authority (not the material cited in the TAM and the write-up which seem inapposite). It would be relevant what happens if an employee terminates before the "loan" is repaid, and how the arrangement is documented and what actually occurs in practice. We could discuss factual development with you and the agent.

Attachments: Rev Rul 68-239, Rev Rul 68-337

What does the Code say today, for your facts?

This advice was written for IRS staff and cannot be cited. Ezel checks the current Internal Revenue Code and IRS guidance against your situation, with citations.

Opens in Ezel Pro.

  • Checks the law as it stands today, not only this page
  • Cites every source it relies on, so you can verify it
  • Chat, drafting and research in one workspace