Proposed regulations: Election for property transferred for services

Proposed regulations: Section 83(b) election process

The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-135524-14) for taxpayers who wish to make an election under section 83(b) with respect to property that is transferred in connection with the performance of services.

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These proposed regulations [PDF 201 KB] remove a requirement that, in connection with the election under section 83(b), the taxpayer who performed the services must submit a copy of the election statement with his or her income tax return for the tax year in which the property was transferred.

Change to election process

As explained in the preamble to these proposed regulations, this change is being made in recognition of the fact that many taxpayers want to file their tax returns electronically but are not able to do so if they want to make a section 83(b) election. Rather, individuals who make a section 83(b) election have been required to file a paper version of their returns to comply with current regulatory requirements.

Accordingly, to remove this obstacle to e-filing of the tax return, today’s release proposes to remove the requirement that a copy of the section 83(b) election be submitted with the tax return for the year the property is transferred. Rather, section 83(b)(2) requires that the section 83(b) election be filed with the IRS no later than 30 days after the property is transferred to the persons providing the services. The section 83(b) election is scanned by the IRS Service Center receiving the election, and an electronic copy of the election is generated. According to the preamble, the creation of this election copy of the section 83(b) election eliminates the need for the taxpayer to submit a copy of the section 83(b) election with his or her income tax return.

This change is proposed to apply as of January 1, 2016, but taxpayers may rely on these proposed regulations for property transferred on or after January 1, 2015.

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