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the Retention Payments and the disputed 1991 SRP Benefits were
“contingent on a change in the ownership or effective control” of
petitioner within the meaning of section 280G(b)(2)(A)(i)(I).
Second, the parties disagree about the extent to which petitioner
has established that the foregoing amounts constitute reasonable
compensation within the meaning of section 280G(b)(4)(A).
A. General Requirements of Section 280G
In general terms, section 280G disallows a deduction for any
payment in the nature of compensation to certain individuals
performing services for a corporation (i) if the payment is
contingent on a change in ownership or control of the
corporation, (ii) if and to the extent the payment exceeds three
times the individual’s annual compensation in periods preceding
the change in control, and (iii) if and to the extent the payment
has not been shown by the taxpayer to constitute reasonable
compensation for services rendered before or after the change in
ownership or control.
More specifically, section 280G(a) disallows a deduction for
any “excess parachute payment”, defined in section 280G(b)(1) as
“an amount equal to the excess of any parachute payment over the
portion of the base amount allocated to such payment.”
“[P]arachute payment”, as relevant to the instant case, is
defined in section 280G(b)(2)(A) as follows:
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