ABATax Comment Concerning IRS Notice 2001-10

Section of Taxation
Submission to the Federal Executive Branch

Comments Concerning IRS Notice 2001–10
April 2001


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Executive Summary
Comments on Notice 2001–10
I. Characterizing Equity SDAs
A. Section 7872
1. Difference in Tax Treatment – Demand Loans vs. Term Loans
2. Characterizing Equity SDAs as Loans under Section 7872
3. Calculating the Period for a Term Loan
4. Identifying the Loans Subject to Section 7872
5. Employer Interest in Excess of Premium Payments
6. Payments by Employee under Existing Equity SDAs
7. Tax Reporting
8. Gift Tax Implications
B. Section 83
1. Section 83 Requires a Transfer of Property
2. Employer as Beneficial Owner of Property
3. Identifying the Transfer of Property in an Equity SDA
4. Substantially Vested
5. Section 83(b) Elections
6. Employer Tax
7. Employee Basis in the Policy
8. Payment of Death Benefit
9. Amount of Life Insurance Protection
C. Transition Issues
1. Electing Loan Treatment for Equity SDAs
2. Taxing Earnings under Equity SDA under Interim Guidance
3. Election Procedures
4. Good Faith Failure to Account for Benefits
5. Application of Clearly Inconsistent Standard
II. Tax Rules for Equity SDAs Established Prior to the Notice
III. Standardized SDA Table to Value Economic Benefits
A. Reflecting Actual Mortality Expense to Determine Economic Benefit
B. Updating SDA Table
C. Survivorship Table