Susan,an executive,receives a golden parachute payment of $500,000 from her employer.Her average annual compensation for the most recent five years is $100,000.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

According to the golden parachute rule under section 280G of the Internal Revenue Code, if an executive receives a payment that meets certain criteria, the employer is not allowed to deduct the excess amount over three times the executive's average annual compensation for the previous five years.

In this case, the excess payment is $400,000 ($500,000 - $100,000 x 3). Therefore, the disallowed deduction to the employer is $400,000.

Susan will also be subject to an excise tax equal to 20% of the excess payment over the limit ($400,000) which is $80,000.

Therefore, option B is correct.

Susan,an Executive,receives a Golden Parachute Payment of $500,000 from Her