[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Proposed Rules]
[Pages 42439-42440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17530]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-135524-14]
RIN 1545-BM63
Property Transferred in Connection With the Performance of
Services
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations relating to
property transferred in connection with the performance of services.
These proposed regulations affect certain taxpayers who receive
property transferred in connection with the performance of services and
make an election to include the value of substantially nonvested
property in income in the year of transfer.
DATES: Comments must be received by October 15, 2015.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-135524-14), room
5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
135524-14), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at http://www.regulations.gov/ (IRS REG-135524-14).
FOR FURTHER INFORMATION CONTACT: Concerning these proposed regulations,
Thomas Scholz or Michael Hughes at (202) 317-5600 (not a toll-free
number); concerning submissions of comments, and/or to request a
hearing, Regina Johnson, at (202) 317-6901 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 83(a) of the Internal Revenue Code (Code) provides
generally that if, in connection with the performance of services,
property is transferred to any person other than the person for whom
such services are performed, the excess of the fair market value of the
property (determined without regard to any restriction other than a
restriction which by its terms will never lapse) as of the first time
that the transferee's rights in the property are transferable or are
not subject to a substantial risk of forfeiture, whichever occurs
earlier, over the amount (if any) paid for the property is included in
the service provider's gross income for the taxable year which includes
such time. Section 83(b) and Sec. 1.83-2(a) permit the service
provider to elect to include in gross income, as compensation for
services, the excess (if any) of the fair market value of the property
at the time of transfer over the amount (if any) paid for the property.
Under section 83(b)(2), an election made under section 83(b) must
be made in accordance with the regulations thereunder and must be filed
with the IRS no later than 30 days after the date on which the property
is transferred to the service provider. Under Sec. 1.83-2(c), an
election under section 83(b) is made by filing a copy of a written
statement with the IRS office with which the person who performed the
services files his or her return. In addition, the person who performed
the services is required to submit a copy of such statement with his or
her income tax return for the taxable year in which such property was
transferred. Section 1.83-2(d) requires that the person who performed
the services also submit a copy of the section 83(b) election to the
person for whom the services were performed.
In recent years, it has come to the attention of the IRS that many
taxpayers who wish to electronically file (e-file) their annual income
tax return have been unable to do so because of the requirement in
Sec. 1.83-2(c) that they submit a copy of their section 83(b) election
with their income tax return. Commercial software available for e-
filing income tax returns does not consistently provide a mechanism for
submitting a section 83(b) election with an individual's e-filed
return. As a result, an individual who has made a section 83(b)
election may be unable to e-file his or her return and at the same time
comply with the requirement in Sec. 1.83-2(c) that a copy of the
section 83(b) election be submitted with the return. An individual who
made a section 83(b) election would be required to paper file his or
her income tax return to comply with the requirements under Sec. 1.83-
2(c).
Since the introduction of the e-file program, the IRS has
encouraged taxpayers to file returns electronically. The e-file program
reduces the amount of paper the government must process, and this
reduction of paper processing allows the IRS to be more efficient and
use valuable resources to address other critical work.
In order to remove this obstacle to e-filing an individual tax
return, the proposed regulations would eliminate the requirement under
Sec. 1.83-2(c) that a copy of the section 83(b) election be submitted
with an individual's tax return for the year the property is
transferred. As described in this preamble, section 83(b)(2) requires
that an election made under section 83(b) be filed with the IRS no
later than 30 days after the date that the property is transferred to
the service provider. This statutory requirement provides the IRS with
the original section 83(b) election. Section 83(b) elections are
scanned by the service center receiving the election, and an electronic
copy of the election is generated. The creation of this electronic copy
of the section 83(b) election eliminates the need for a taxpayer to
submit a copy of the section 83(b) election with his or her individual
tax return.
Taxpayers are reminded of their general recordkeeping
responsibilities pursuant to section 6001 of the Code, and more
specifically of the need to keep records that show the basis of
property owned by the taxpayer. Taxpayers must maintain sufficient
records to show the original cost of the property and to support the
tax treatment of the property transfer reported on the taxpayers'
returns. Taxpayers must keep these records as long as they may be
needed for the administration of any provision of the Code. Generally,
this means records that support items shown on a return must be
retained until the period of limitations for that return expires. See
section 6501 of the Code. A copy of any section 83(b) election made
with respect to property must be kept until the period of limitations
expires for the return that reports the sale or other disposition of
the property.
Explanation of Provisions
The proposed regulations would remove the second sentence in Sec.
1.83-2(c) of the existing regulations. This would eliminate the
requirement that taxpayers submit a copy of a section 83(b) election
with their tax return for the year in which the property subject to the
election was transferred.
Proposed Effective Date
These regulations under section 83 are proposed to apply as of
January 1, 2016, and would apply to property transferred on or after
that date. Taxpayers may rely on these proposed regulations for
property transferred on or after January 1, 2015.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required. It also has
been determined that section
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553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because the regulations do not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, these regulations have been submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on small business.
Comments and Request for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are timely submitted
to the IRS as prescribed in this preamble under the ADDRESSES heading.
The Treasury Department and the IRS request comments on all aspects of
the proposed rules. All comments will be available at
www.regulations.gov or upon request. A public hearing will be scheduled
if requested in writing by any person that timely submits written or
electronic comments. If a public hearing is scheduled, notice of the
date, time, and place for the hearing will be published in the Federal
Register.
Drafting Information
The principal authors of these proposed regulations are Thomas
Scholz and Michael Hughes, Office of the Associate Chief Counsel (Tax
Exempt and Government Entities). However, other personnel from the IRS
and the Treasury Department participated in their development.
List of Subjects 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.83-2 is amended by revising paragraph (c) and adding
paragraph (g) to read as follows:
Sec. 1.83-2 Election to include in gross income in year of transfer.
* * * * *
(c) Manner of making election. The election referred to in
paragraph (a) of this section is made by filing one copy of a written
statement with the internal revenue office with which the person who
performed the services files his return.
* * * * *
(g) Effective/applicability date. Paragraph (c) of this section
applies to property transferred on or after January 1, 2016.
John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-17530 Filed 7-16-15; 8:45 am]
BILLING CODE 4830-01-P