[Federal Register Volume 81, Number 143 (Tuesday, July 26, 2016)]
[Rules and Regulations]
[Pages 48707-48708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17591]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9779]
RIN 1545-BM63
Property Transferred in Connection With the Performance of
Services
AGENCY: Internal Revenue Service, Department of Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to property
transferred in connection with the performance of services. These final
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: Effective Date: These regulations are effective on July 26,
2016.
Applicability Date: For dates of applicability, see Sec. 1.83-
2(g).
FOR FURTHER INFORMATION CONTACT: Thomas Scholz or Michael Hughes at
(202) 317-5600 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 83 of the Internal Revenue Code (Code) addresses the tax
consequences of a transfer of property in connection with the
performance of services. Section 83(a) of the Code provides generally
that the excess of the fair market value of the transferred 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 under section 83(b) must be made in accordance
with the regulations thereunder. Under Sec. 1.83-2(c), the election
must be filed with the IRS no later than 30 days after the date on
which the property is transferred, and a copy of the election must be
submitted with the taxpayer's income tax return for the taxable year in
which the property is transferred.
On July 17, 2015, the Department of the Treasury (Treasury) and the
Internal Revenue Service (IRS) published a notice of proposed
rulemaking (REG-135524-14) in the Federal Register (137 FR 42439) under
section 83 of the Code eliminating the requirement that a copy of a
section 83(b) election be submitted with the taxpayer's income tax
return for the taxable year in which the property is transferred.
Treasury and the IRS received no comments responding to the notice of
proposed rulemaking. No public hearing was requested and no public
hearing was held. Treasury and the IRS now adopt the proposed
regulations as final regulations without modification.
Explanation of Provisions
These final regulations remove the second sentence in Sec. 1.83-
2(c) of the existing regulations, which requires that a taxpayer submit
a copy of a section 83(b) election with the taxpayer's tax return for
the year in which the property subject to the election was transferred.
Accordingly, under these final regulations, a taxpayer is no longer
required to file a copy of a section 83(b) election with the taxpayer's
income 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.
[[Page 48708]]
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 any return with respect to which the
income inclusion or basis of the property is relevant.
Applicability Date
These regulations apply to property transferred on or after January
1, 2016. For transfers of property on or after January 1, 2015 and
prior to January 1, 2016, the preamble to the proposed regulations
provides that taxpayers may rely on the guidance in the proposed
regulations (which is identical to the guidance contained in these
final regulations).
Effect on Other Documents
Rev. Proc. 2012-29 (IRB 2012-28, 49) states that a taxpayer making
a section 83(b) election must submit a copy of the election with his or
her tax return for the taxable year in which such property was
transferred. Effective as of July 26, 2016, Rev. Proc. 2012-29 is
revoked, in part, to the extent it requires, inconsistent with these
final regulations, a taxpayer to submit a copy of a section 83(b)
election with his or her income tax return.
Statement of Availability of IRS Documents
Rev. Proc. 2012-29 is published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and is available from the Superintendent of
Documents, U.S. Government Printing Office, Washington, DC 20402, or by
visiting the IRS Web site at http://www.irs.gov.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It also has been determined that section 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.
Drafting Information
The principal authors of these final 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 participated in their development.
List of Subjects 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is 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.
Approved: April 20, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-17591 Filed 7-25-16; 8:45 am]
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