Oct 3, 2012

Alison Dougherty

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IRS Provides Guidance Regarding the I.R.C. Section 83(b) Election

On June 25, 2012, the IRS issued Revenue Procedure 2012-29, which provides new guidance regarding the Internal Revenue Code Section 83(b) election.  A taxpayer who receives substantially nonvested property, such as restricted stock in connection with the performance of services, is eligible to make a Section 83(b) election within 30 days of the date when the property is transferred.  The Section 83(b) election allows the taxpayer to include in gross income as compensation for services the fair market value of the property transferred over the amount paid for such property.  The election prevents the taxpayer from being taxed on the appreciation in value of the property in the year when the property becomes substantially vested.

In Rev. Proc. 2012-29, the IRS provides the text of sample language that taxpayers may utilize for a Section 83(b) election.  The IRS also provides some specific examples of the tax results that may occur from making the Section 83(b) election.  Rev. Proc. 2012-29 includes background information and the consequences of making the Section 83(b) election.
See http://www.irs.gov/irb/2012-28 IRB/ar12.html for the text of Rev. Proc. 2012-29.

For further information, please contact your Aronson tax professional or call 301.231.6200.