Saturday, July 25, 2015

No Need to File §83(b) Election with Tax Return

Not a big item, but a helpful one – under proposed regulations a taxpayer need no longer file a copy of their Code §83(b) election with their income tax return for the year of the election.

Normally under Code §83, a taxpayer who receives property in connection with performing services does not include that property in income until the property is transferable or not subject to a substantial risk of forfeiture. Since it may be advantageous to bring that property into income when received (when it may have a lower value than later), taxpayers can nonetheless elect to include it when received under §83(b). To make the election, the taxpayer must file the election within 30 days of the property transfer and file a copy of the election with their income tax return for that year. Since the filing of a copy with the return may inhibit taxpayers from filing their returns electronically, this second requirement is now removed. However, the filing of the election within 30 days is still required.

The proposed regulations are proposed to apply on January 1, 2016. Nonetheless, taxpayers may rely on them for transfers occurring on or after January 1, 2015.

Preamble to Prop Reg 07/16/2015, Prop Reg § 1.83-2

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