Chief Counsel Memorandum on Correcting Section 409A Failures

Chief Counsel Memorandum 201518013 states that correcting a failure applicable only to compensation subject to a substantial risk of forfeiture made before the compensation vests but during the service provider’s taxable year in which it vests does not avoid income inclusion.

Document Excerpt

The correction of a failure to comply with section 409A(a) during a taxable year indicates that a failure existed during the taxable year in which the correction is made. In accordance with section 409A(a)(1)(A)(i), a failure applicable to deferred compensation subject to a substantial risk of forfeiture that lapses during the taxable year results in income inclusion of the deferred amount under section 409A, regardless of whether the failure is corrected during the same taxable year but before the substantial risk of forfeiture lapses.



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