In Field Attorney Advice dated 10/25/13, the IRS cites extensive authority for its position that legally binding rights do not exist when an employer has reserved to itself the unilateral right to reduce or eliminate bonus awards prior to making payments. While focused on when tax deductions are allowable, the memo has interesting implications under Code §409A because Treas. Reg. §1.409A-1(b)(1) provides that legally binding rights may arise -- despite an employer's reservation of rights to reduce awards -- if facts and circumstances indicate that  those rights "lack substantive significance."  In the absence of a family inter-relationship or employer actions undermining its discretion to reduce or eliminate bonuses or other awards, the IRS Field Attorney Advice Memo is significant because it provides solid authority on which to argue that an employer's reservation of rights makes Code §409A totally inapplicable. For a copy of the IRS memo, email Mark.