Comments Concerning IRS Notice 2001–10
I. Characterizing Equity SDAs
- Section 83
- Employee Basis in the Policy
We suggest that the Treasury and IRS provide guidance regarding whether employee payments towards the cost of the premium payments create basis. Section 72(e)(6)(B) provides that a person has a basis in an insurance policy equal to the total consideration paid for the policy. We note that PLR 8310027 appears to have permitted the employee a cost basis for contributions made pursuant to the terms of an Equity SDA. The employee should be able to offset the income or amount realized from any transferred equity to the extent of the employee's basis 6 Similar basis questions should also be addressed with respect to paid up additions that constitute taxable "additional benefits" to the employee under Revenue Ruling 66-110.
6 As noted above, basis should include, if applicable, any CSV taxed to the employee.