COM 0458.003 1996-1998 - Laserfiche WebLink

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::pant granting Hamakua Housing a power of attorney to deal the Camps. As a general rule, a power of attorney is ocable at will or upon the death of the principal. A power of ~rney may be made irrevocable, however, if it is "coupled with interest." In this particular case the "interest" would be - akua Housing s transfer of the ComDS to the Occupants (i.e., sKUd Housing would not transfer th amnG c he Occu ap nts =ss it receives the irrevocable power of attorney from the ipants b. Disadvantages. (1) Taxi Payments made from an employer to an ogee, whether in cash or in property, upon the termination of mployee's employment are considered severance pay. Severance is taxable compensation income to the employee under 561 of internal Revenue Code of 1986, as amended {the "Code"). eth Ramella, TC Memo 1979-77. In Carragan v. Commissioner, F.2d 246 (2nd Cir. 1951), the court found that severance ents made to an employee upon liquidation of the corporation tituted taxable income, even though the employer had no 3ation_to make such payments. Consequently, there is a imption that any payments from an employer to its employees, ier in cash or in property, are paid as compensation for _ces rendered by the employees. In addition to being taxable compensation, any payments by an employer to an employee on account of an involuntary ` nation of employment constitutes "wages" subject to olding, regardless of whether the employer is legally bound ke such payments. Treasury Regulation ("Reg.") §31.3401(a)- 4). Consequently, the appropriate .amount of Federal and i income and payroll taxes must be withheld from such zts. If the Camps are transferred to Hamakua Housing and ire transferred to the Occupants, there is the potential :he Internal Revenue Service ("IR5") may contend that the ~t of the camps constitute severance pay to the Occupants. h event, the fair market value of the Camps would tute taxable income to the Occupants and be subject Federali waif income taxes. In addition, Hamakua Sugar would be ed to withhold the appropriate amount of income and payroll based upon the fair market value of the Camps. The IRS may ontend that Hamakua Housing is acting as an agent on'behalf akua Sugar. The IRS's argument would be that the substance ' transaction is the same as if the Camps were transferred .y from Hamakua Sugar to the Occupants. If the IRS is in this "agency " argument, there is also a possibility ie "responsible" officers of Hamakua Housing would be illy liable for the full amount of any taxes not withheld ere "wages". CX~h~li ~