Rev. Proc. 71-19
1971-1 C.B. 698
Section 404 -- Plan Contribution Deduction
Statement of Procedural Rules
Amplified by Rev. Proc. 92-65
Advance rulings will be issued with respect to the application of the
doctrine of constructive receipt to unfunded deferred compensation arrangements
if the plan meets certain requirements.
Rev. Proc. 71-19
Section 1. Purpose.
The purpose of this Revenue Procedure is to set forth the conditions, or
circumstances, under which the Internal Revenue Service will issue advance rulings
concerning the application of the doctrine of constructive receipt to unfunded
deferred compensation arrangements.
Sec. 2. Background.
In 1960, the Internal Revenue Service issued Revenue Ruling 60-31, C.B. 1960-1, 174,
to provide guidelines concerning the application of the doctrine of constructive
receipt to certain deferred compensation arrangements. Revenue Ruling 60-31 was
modified by Revenue Ruling 64-279, C.B. 1964-2, 121, and Revenue Ruling 70-435,
C.B. 1970-2, 100.
Sec. 3. Requests For Rulings.
In each case involving a deferral
of compensation, a determination of whether the doctrine of constructive
receipt is applicable may be made only after consideration of the specific
factual situation involved. A ruling letter will be issued concerning unfunded
deferred compensation arrangements only if the plan meets the following
.01 If the plan provides for an election to defer payment of compensation,
such election must be made before the beginning of the period of service for
which the compensation is payable, regardless of the existence in the plan of
.02 If any elections, other than the initial election
referred to in .01 above, may be made by an employee subsequent to the beginning
of the service period the plan must set forth substantial forfeiture provisions
that must remain in effect throughout the entire period of the deferral.
A substantial forfeiture provision will not be considered to exist unless its
conditions impose upon the employee a significant limitation or duty which will
require a meaningful effort on the part of the employee to fulfill and there is
a definite possibility that the event which will cause the forfeiture could occur.
Sec. 4. Instructions.
The general procedures of Revenue
Procedure 69-1, C.B. 1969-1, 381, relating to the issuance of rulings and
determination letters are applicable to requests relating to unfunded deferred
compensation arrangements to the extent not covered by this Revenue Procedure.
Sec. 5. Effective Date.
This Revenue Procedure is effective on
June 21, 1971, the date of its publication in the Internal Revenue Bulletin.