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Bonus? No thanks…

Speaker of the House Pelosi yesterday said that AIG execs should “renounce the bonuses and refuse the excessive retention pay they previously agreed to.” Later, President Obama also said that the AIG employees should seriously consider not accepting the bonuses.

But wait… what about that pesky constructive receipt rule? For decades, tax practitioners have had to worry about the possibility of constructive receipt whenever they crafted a compensation plan. It’s mantra that you can’t turn your back on income that’s already been earned and payable to you–you’ll be taxed whether you take the money or not.

Of course, it’s hard to imagine the Treasury trying to enforce the constructive receipt rule in these circumstances, and I’m sure Congress would be happy to pass legislation making an exception to the rule if necessary. But technically, waive your bonus, and the government can still take the taxes. Or maybe that’s part of the deficit reduction plan…

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