Close
Close

IRS proposes regulations on Section 83(b) elections

RFP
Tax Hot Topics - IRS proposes regulations on Section 83(b) electionsThe IRS released proposed regulations (REG-135524-14) that would eliminate the requirement for individuals to attach Section 83(b) elections to their individual income tax returns for the year the election is made.

Section 83(b) allows a service provider to make an election to include the fair market value of property transferred in connection with the performance of services, less the amount paid for the property (if any), in income on the date the property is transferred (for example, the grant date) even though the property is subject to a substantial risk of forfeiture. To make a valid Section 83(b) election under the current regulations, the service provider must file an election statement with the IRS within 30 days after the date the property is transferred to him or her, provide a copy of the election to the employer that transferred the property and attach a copy of the election to the service provider’s federal income tax return for the year the election is made.  

According to the IRS, many taxpayers couldn’t efile their individual income tax returns because of the requirement to attach the Section 83(b) election to the return. These proposed regulations would eliminate the requirement to attach a copy of the election to the service provider’s federal income tax return for the year the election is made, and enable these taxpayers to efile their tax returns. If finalized, these regulations would apply to property transferred on or after Jan. 1, 2016.  However, taxpayers may rely on these proposed regulations for property transferred on or after Jan. 1, 2015.  

The IRS has been lenient with taxpayers who have previously failed to attach a Section 83(b) election to their federal tax returns in accordance with the current regulations. For example, in a recently released private letter ruling (PLR 201528001), the IRS ruled that a taxpayer’s Section 83(b) election was valid even though the taxpayer failed to attach a copy of the Section 83(b) election to his tax return for the year in which the election was made.  

Contact
Eddie Adkins
+1 202 521 1565
eddie.adkins@us.gt.com

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.