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***** Scenario 2: Nonqualified Deferred Compensation Executive receives nonqualified...

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Accounting

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Scenario 2: Nonqualified Deferred Compensation
Executive receives nonqualified deferred compensation of $250,000.
The compensation vests (becomes non-forfeitable) several years later.
Wages: $300,000
Interest and Dividend Income: $10,000
Itemized Deductions: $40,000
Allowable deduction for self-employment tax: None
Calculate:
AGI, Taxable Income, and Total Tax Liability in the year the compensation vests.
Discuss the tax treatment for the employer (when can they deduct the expense).

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