ABATax Comment Concerning IRS Notice 2001-10

Section of Taxation
Submission to the Federal Executive Branch

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Comments Concerning IRS Notice 2001–10
April 2001

I.  Characterizing Equity SDAs

  1. Section 7872
     
    1. Tax Reporting

      The mechanics to report compensation under Equity SDAs should be clarified. Section 7872(f)(9) provides that imputed compensation income is not subject to income tax withholding. However, it appears that the employer is responsible to report the compensation income from a below-market loan. As a practical matter, the employer may need to rely on the insurance company issuing the policy for reporting information. Will the employer be subject to reporting penalties if this information is not provided on a timely basis by the insurance company? Recognizing that the employer might not be able to track loans by itself, will the insurer that issued the policy subject to the Equity SDA be responsible to report income from Equity SDAs treated as a below-market loan?

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