IRS Issues Sample Text for Sec. 83(b) Election

By Alistair M. Nevius, J.D.

From the IRS

The IRS released sample language for making a Sec. 83(b) election to include property received in connection with the performance of services in income in the year the property is received even if there is a substantial risk that the property will later be forfeited (Rev. Rul. 2012-29). The ruling also contains examples of the amount of income taxpayers would recognize if they made the election.

Although the revenue ruling provides sample text to make the election under Sec. 83(b), the sample text need not be used if the taxpayer files a written statement that includes the information required under Regs. Sec. 1.83-2(e). The election statement must be filed no later than 30 days after the date the property was transferred to the taxpayer (or the next business day if 30 days falls on a Saturday, Sunday, or holiday). The statement is filed with the IRS office where the taxpayer making the election files his or her return, and the taxpayer must also submit a copy of the election with his or her tax return for the year the property was transferred and a copy to the person for whom the taxpayer performed the services for which the property was transferred.

When a taxpayer makes a Sec. 83(b) election, he or she is electing to include in gross income as compensation the excess, if any, of the property’s fair market value at the time of the transfer (determined without regard to any lapse restriction) over the amount, if any, paid for the property. The ruling contains six examples illustrating how these rules apply, both when the election has been made and when it has not.

 

Newsletter Articles

AWARD

James M. Greenwell Wins 2014 Best Article Award

The winner of The Tax Adviser’s 2014 Best Article Award is James M. Greenwell, CPA, MST, a senior tax specialist–partnerships with Phillips 66 in Bartlesville, Okla., for his article, “Partnership Capital Account Revaluations: An In-Depth Look at Sec. 704(c) Allocations.”

 

FEATURE

How Legal Marijuana Businesses Are Treated Federally

This article examines the tax problems that these businesses face and warns that professionals may provide services to them at their peril.