Comments Concerning IRS Notice 2001–10
I. Characterizing Equity SDAs
- Section 7872
- Identifying the Loans Subject to Section 7872
We suggest that the IRS provide simplified rules for identifying when below-market loans are made under Equity SDAs for purposes of Section 7872. A literal reading suggests that each premium payment is a separate loan. 3 If each premium payment is considered to be a separate loan and premiums are paid monthly, the employer would be responsible to track compensation on one hundred and twenty separate loans in an Equity SDA that continues for ten years. Consideration should be given to allowing employers to aggregate premium payments during a selected twelve-month period as a single loan for purposes of Section 7872. It would also be helpful to have guidance addressing when and how to determine the applicable federal rate under Section 1274(d) of the Code for each below-market loan.
3 See Prop. Reg. 1.7872-2(a)(3) (stating "each extension of credit or transfer of money by a lender to a borrower is treated as a separate loan").