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IRS Letter Ruling Affects Broker's Up-Front Payment
A recent letter ruling affects "forgivable loans" made to brokers. The IRS has decided that upfront bonus payments are not bona fide loans in Letter Ruling 200040004.
The effect of this ruling is twofold. First, a broker must recognize taxable pay on the receipt of the upfront payments.
Second, the firm may not claim an immediate deduction, since the "loan" actually constitutes advance payment for services. Liability for that expense is not incurred until the broker performs services. At that time, a deduction may be claimed for that part of the upfront payment allocable to performed services.
Source: Investment News, February 12, 2001
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
investors nationwide in arbitration, litigation and regulatory matters, and a shareholder with the law firm
Shaheen, Novoselsky, Staat, Filipowski & Eccleston
P.C.(www.snsfe-law.com). This Web site contains material
of general interest. It is neither intended to, nor constitutes, either legal advice or investment advice.
Always consult an attorney and/or investment advisor when building and protecting your wealth.
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