Compensation & Benefits Alert - July 2014

The Service recently issued Rev. Rul. 2014-18,¹  which clarifies that properly designed stock options and stock-settled stock appreciation rights ("SARs") are forms of deferred compensation that may be granted to service providers (including hedge fund managers) of certain hedge funds and entities that are based in foreign tax havens.  Such awards are exempt from section 457A, which generally precludes deferred compensation arrangements between these service providers and service recipients.