IRS No Longer Requires Additional Sec. 83(b) Statement With Tax Return

Under Sec. 83(b), a taxpayer receiving property subject to a substantial risk of forfeiture as compensation for services may elect to include in gross income the fair market value of property at the time of the transfer over the amount paid for the property. Under Sec. 83(b)(2), taxpayers must also file a written statement of the election within 30 days after the property transfer.

To facilitate e-filing, the IRS finalized, without changes, proposed regulations (REG-135524-14) issued last year that amend Regs. Sec. 1.83-2(c) to eliminate the requirement that taxpayers making a Sec. 83(b) election file a copy of the election statement with their tax return for the year of the transfer of property for which the election is made (T.D. 9779).  

Under Regs. Sec. 1.83-2(c), a Sec. 83(b) election statement must be filed with the IRS no later than 30 days after the date on which the property is transferred. The IRS stated in a preamble to the proposed regulations that IRS personnel electronically scan these statements, which eliminates the need for an additional submission of them with a tax return. Moreover, because commercial tax preparation software does not always allow electronic submission of a Sec. 83(b) election statement with a tax return, taxpayers had been unable to electronically file their return in those instances.

The final regulations apply to property transferred on or after Jan. 1, 2016, but taxpayers also may rely on the guidance in the identical proposed rules for property transferred on or after Jan. 1, 2015. In addition, Rev. Proc. 2012-29, which provides the general rules for making a Sec. 83(b) election, is revoked to the extent it is inconsistent with these regulations.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.