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Scenario $2$: Nonqualified Deferred Compensation

Executive receives nonqualified deferred compensation of $$250,000.$

The compensation vests $($becomes non$-$forfeitable$)$ several years later.

Wages: $$300,000$

Interest and Dividend Income: $$10,000$

Itemized Deductions: $$40,000$

Allowable deduction for self$-$employment tax: None

Calculate:

AGI, Taxable Income, and Total Tax Liability in the year the compensation vests.

Discuss the tax treatment for the employer $($when can they deduct the expense$).$