Ronald Cluett Talks to Tax Notes On Buyback Tax Guidance

Guidance would help employers determine which stock transfers qualify for legislative provisions that are expected to blunt the impact of the new 1 percent stock buyback tax, observers say.

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Ronald G. Cluett of Caplin & Drysdale expects that when issued, the guidance will limit applicability of the exception to tax-qualified plans. “It seems to me that Treasury is unlikely to permit the exception to apply to nonqualified deferred compensation plans offered to executives, which often have assets earmarked in a rabbi trust,” he said. “On the other hand, using the exception to fund a qualified defined benefit plan strikes me as squarely within the scope of the exception.”

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