98 STAT. 586
PUBLIC LAW 98-369—JULY 18, 1984 "(C) TREATMENT OF CERTAIN AGREEMENTS ENTERED INTO WITHIN 1 YEAR BEFORE CHANGE OF OWNERSHIP.—For pur-
poses of subparagraph (A)(i), any payment pursuant to— "(i) an agreement entered into within 1 year before the change described in subparagraph (A)(i), or "(ii) an amendment made within such 1-year period of a previous agreement, shall be presumed to be contingent on such change unless the contrary is established by clear and convincing evidence. "(3) BASE AMOUNT.—
"(A) IN GENERAL.—The term 'base amount' means the individual's annualized includible compensation for the base period. "(B) ALLOCATION.—The portion of the base amount allocated to any parachute payment shall be an amount which bears the same ratio to the base amount as— "(i) the present value of such payment, bears to "(ii) the aggregate present value of all such payments. "(4) EXCESS PARACHUTE PAYMENTS REDUCED TO EXTENT TAXPAYER ESTABLISHES REASONABLE COMPENSATION.—In the case of
any parachute payment described in paragraph (2)(A), the amount of any excess parachute payment shall be reduced by the portion of such payment which the taxpayer establishes by clear and convincing evidence is reasonable compensation for personal services actually rendered. For purposes of the preceding sentence, reasonable compensation shall be first offset against the base amount. "(c) DISQUALIFIED INDIVIDUALS.—For purposes of this section, the term 'disqualified individual' means any individual who is— "(1) an employee, independent contractor, or other person specified in regulations by the Secretary who performs personal services for any corporation, and "(2) is an officer, shareholder, or highly-compensated individual. For purposes of this section, a personal service corporation (or similar entity) shall be treated as an individual. "(d) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of this section— "(1)
ANNUALIZED
INCLUDIBLE
COMPENSATION
FOR BASE
PERIOD.—The term 'annualized includible compensation for the base period' means the average annual compensation which— "(A) was payable by the corporation with respect to which the change in ownership or control described in paragraph (2)(A) of subsection (b) occurs, and "(B) was includible in the gross income of the disqualified individual for taxable years in the base period. "(2) BASE PERIOD.—The term 'base period' means the period consisting of the most recent 5 taxable years ending before the date on which the change in ownership or control described in paragraph (2)(A) of subsection (b) occurs (or such portion of such period during which the disqualified individual was an employee of the corporation). ' (3) PROPERTY TRANSFERS.—Any transfer of property—
"(A) shall be treated as a payment, and "(B) shall be taken into account as its fair market value.
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