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. Transition Issues
     
    1. Good Faith Failure to Account for Benefits

      We suggest that a good faith failure to account for all benefits under an Equity SDA not disqualify the parties from using a mutually agreed upon characterization for the transaction. We agree that the Treasury should not be whipsawed by taxpayers annually changing their method for reporting income from Equity SDAs. However, it seems inappropriate to disqualify the parties to an Equity SDA from applying Section 7872 if, for example, an incorrect applicable federal rate was used to impute compensation income to an employee.

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