“This notice provides additional guidance on the application of a service recipient’s death under § 409A of the Internal Revenue Code to nonqualified deferred compensation plans,” says the preamble to “Notice” 2007-90. This supposed guidance includes:
- A more precise definition of death (also known as “separation from life”).
- Presumptions the Service will apply in determining if a service recipient has experienced a separation from life under § 409A.
- Examples detailing situations that the help illustrate the Treasury’s position on separation from life—including the following:
Pete uses 5% of his brain and 50% of his body on a daily basis. Pete has struck a deal with the devil such that, in exchange for his soul, Pete retains the right to regain life after the first two times that he would otherwise separate from life. Pete gets mauled by a cougar and is not performing any mental and bodily functions for more than 10 minutes. However, because Pete retains the right to regain life, he has not experienced a separation from life.
Obviously, the “Notice” is an Internet spoof, spawned from some tax bloggers with a bit too much time on their hands this Halloween; read their humorous take on 409A here. The “real” Notice 2007-90 was issued last week, alerting taxpayers, tax practitioners, and “other persons who represent estates” that the IRS has changed its policy and “will now determine on a case-by-case basis whether security will be required” for estates that elect to defer applicable tax for closely held businesses under IRC § 6166. The change resulted from the Tax Court’s ruling earlier this year in Estate of Roski (April 12, 2007). To read the “real” Notice 2007-90, click here.
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