IRS Ruling Allows Tax-Deferred Stock Rights for Fund Managers

By and on July 17, 2014

Revenue Ruling 2014-18 holds that stock options and stock-settled stock appreciation rights (stock rights) granted by offshore funds and other entities domiciled in tax-indifferent jurisdictions can be structured to avoid immediate taxation under Section 457A of the U.S. tax code. Among other things, this ruling allows an offshore fund to compensate its managers with stock rights that will only be subject to U.S. tax upon exercise, so long as the stock right is exempt from Section 409A and the manager has the same redemption rights with respect to acquired shares as other shareholders of the hedge fund.

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Andrew Liazos
Andrew C. Liazos heads the Firm's Executive Compensation Group and the Boston Employee Benefits Practice. Andrew focuses his practice on compensation and benefit matters, including related securities, M&A, IPO, private equity, international and litigation matters. Clients range from Fortune 500 companies to compensation committees to individual executives in employment and severance negotiations. Read Andrew Liazos' full bio.


Ruth Wimer



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