The Valley Current®: Does ChatGPT provide accurate tax advice?

The amount of information readily available on the internet is vast, but standard information for the most part. Specific, personal advice might always be something we always consult the pros for, but the search for optimized information is in the works. Where accuracy counts, it seems as though ChatGPT could be the next major breakthrough in online customer service… but will AI be able to go toe-to-toe with knowledge professionals? Jack Russo asks CPA Steve Rabin if ChatGPT came up with CPA level tax advice regarding Roth IRA’s.

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What is 280G of the Internal Revenue Code?

 

Section 280G of the Internal Revenue Code (IRC) provides rules for the treatment of golden parachute payments made to certain executives in connection with a change in control of a corporation. It provides that such payments will be disallowed as a deduction to the corporation if they are deemed excessive and also imposes an additional 20% excise tax on the recipient. The purpose of 280G is to limit the amount of compensation that executives can receive when their employer is sold or undergoes some other type of change in control.

 

What limits does 280G impose?

 

Section 280G imposes limits on the amount of golden parachute payments that executives can receive in connection with a change in control of a corporation. If the aggregate present value of such payments exceeds a certain threshold, they will be disallowed as a deduction to the corporation. Additionally, the executive will be subject to an additional 20% excise tax on the portion of the payments that exceeds the threshold. The threshold is calculated based on a formula specified in the code and is designed to limit the amount of compensation that executives can receive in connection with a change in control. The limits imposed by 280G are intended to discourage executives from negotiating excessive compensation packages in these situations, as the tax consequences can be significant.

 

 

What 280G safe harbors exist?

 

There are two safe harbors under Section 280G of the Internal Revenue Code (IRC) which, if met, protect golden parachute payments from being considered excessive and disallowed as a deduction to the corporation, and from triggering the additional 20% excise tax on the recipient. The two safe harbors are:

1. Rebuttable Presumption: A payment will be considered reasonable if the aggregate present value of all parachute payments does not exceed three times the base amount. The base amount is defined as the executive's average annual compensation for the five taxable years preceding the change in control.

2. Bona Fide Employment Actions: A payment will not be considered a golden parachute payment if it is paid under an arrangement that was not in effect at the time of the change in control, and is made on account of an employment agreement which was in effect on the date of the change in control, and such payment is not in excess of the average of the amounts paid under such agreement for the taxable year preceding the change in control.

By meeting either of these safe harbors, the payments will not be subject to the disallowance and excise tax provisions under 280G. It is important to note that the application of the safe harbors is complex and fact-specific, and professional tax advice should be sought in order to determine whether they apply in a particular case.

 

Are there 280G regulations?

 

Yes, there are regulations under Section 280G of the Internal Revenue Code (IRC) that provide guidance on the calculation of golden parachute payments, the calculation of the base amount, the calculation of the aggregate present value, and the application of the safe harbors. These regulations, known as Treasury Regulations, are issued by the Department of the Treasury and are intended to provide clarity and guidance on the provisions of 280G. The regulations are legally binding and provide detailed instructions and examples on how to comply with the requirements of 280G. It is important to review and understand the regulations when applying the provisions of 280G, as they provide critical guidance on the tax treatment of golden parachute payments.

 

Where does the IRS publish its 280G regulations?

 

The Internal Revenue Service (IRS) publishes its regulations under Section 280G of the Internal Revenue Code (IRC) in the Code of Federal Regulations (CFR). The CFR is the official compilation of federal agency rules and regulations, and it is divided into 50 titles, each representing a general area of federal regulation. The regulations under 280G can be found in Title 26 of the CFR, also known as the "Tax Code". Specifically, the regulations can be found in Subchapter A, Part 1, Subpart E, Section 1.280G-1. The regulations can be accessed through the Government Printing Office website or on the IRS's website.

 

Are there any 280G calculators available on line?

 

Yes, there are online calculators available for determining the tax implications of golden parachute payments under Section 280G of the Internal Revenue Code (IRC). These calculators are typically designed to help executives, corporations, and tax professionals determine the amount of golden parachute payments that would be considered excessive and subject to disallowance as a deduction to the corporation and the additional 20% excise tax on the recipient. However, it is important to note that these calculators are not a substitute for professional tax advice, as the application of 280G can be complex and fact-specific. In order to ensure accurate compliance with 280G, it is recommended to consult with a tax professional who is familiar with the provisions of 280G and the related regulations.

 

Where are the 280G calculators published on the Internet?

 

280G calculators can be found on various websites, including those of accounting and tax preparation firms, legal and consulting firms specializing in executive compensation, and online financial planning tools. Some websites that provide 280G calculators include:

1. Deloitte Tax & Consulting

2. EisnerAmper

3. The Compensation Group

4. PwC

It is important to note that these calculators may have different levels of complexity and accuracy, and the results obtained from them should be used for informational purposes only and not as a substitute for professional tax advice.