80 FR 42439 - Property Transferred in Connection With the Performance of Services

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 80, Issue 137 (July 17, 2015)

Page Range		42439-42440
FR Document		2015-17530

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.

Federal Register, Volume 80 Issue 137 (Friday, July 17, 2015)

[Federal Register Volume 80, Number 137 (Friday, July 17, 2015)]
[Proposed Rules]
[Pages 42439-42440]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-17530]



[[Page 42439]]

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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.

-----------------------------------------------------------------------

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

[[Page 42440]]

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

Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Proposed Rules 42439

DEPARTMENT OF THE TREASURY included in the service provider’s gross return for the year the property is
income for the taxable year which transferred. As described in this
Internal Revenue Service includes such time. Section 83(b) and preamble, section 83(b)(2) requires that
§ 1.83–2(a) permit the service provider an election made under section 83(b) be
26 CFR Part 1 to elect to include in gross income, as filed with the IRS no later than 30 days
[REG–135524–14] compensation for services, the excess (if after the date that the property is
any) of the fair market value of the transferred to the service provider. This
RIN 1545–BM63 property at the time of transfer over the statutory requirement provides the IRS
amount (if any) paid for the property. with the original section 83(b) election.
Property Transferred in Connection Under section 83(b)(2), an election Section 83(b) elections are scanned by
With the Performance of Services made under section 83(b) must be made the service center receiving the election,
AGENCY: Internal Revenue Service (IRS), in accordance with the regulations and an electronic copy of the election is
Treasury. thereunder and must be filed with the generated. The creation of this
ACTION: Notice of proposed rulemaking.
IRS no later than 30 days after the date electronic copy of the section 83(b)
on which the property is transferred to election eliminates the need for a
SUMMARY: This document contains the service provider. Under § 1.83–2(c), taxpayer to submit a copy of the section
proposed regulations relating to an election under section 83(b) is made 83(b) election with his or her individual
property transferred in connection with by filing a copy of a written statement tax return.
the performance of services. These with the IRS office with which the Taxpayers are reminded of their
proposed regulations affect certain person who performed the services files general recordkeeping responsibilities
taxpayers who receive property his or her return. In addition, the person pursuant to section 6001 of the Code,
transferred in connection with the who performed the services is required and more specifically of the need to
performance of services and make an to submit a copy of such statement with keep records that show the basis of
election to include the value of his or her income tax return for the property owned by the taxpayer.
substantially nonvested property in taxable year in which such property was Taxpayers must maintain sufficient
income in the year of transfer. transferred. Section 1.83–2(d) requires records to show the original cost of the
DATES: Comments must be received by that the person who performed the property and to support the tax
October 15, 2015. services also submit a copy of the treatment of the property transfer
section 83(b) election to the person for reported on the taxpayers’ returns.
ADDRESSES: Send submissions to:
whom the services were performed. Taxpayers must keep these records as
CC:PA:LPD:PR (REG–135524–14), room In recent years, it has come to the
5205, Internal Revenue Service, PO Box long as they may be needed for the
attention of the IRS that many taxpayers administration of any provision of the
7604, Ben Franklin Station, Washington, who wish to electronically file (e-file)
DC 20044. Submissions may be hand Code. Generally, this means records that
their annual income tax return have support items shown on a return must
delivered Monday through Friday been unable to do so because of the
between the hours of 8 a.m. and 4 p.m. be retained until the period of
requirement in § 1.83–2(c) that they limitations for that return expires. See
to CC:PA:LPD:PR (REG–135524–14), submit a copy of their section 83(b)
Courier’s Desk, Internal Revenue section 6501 of the Code. A copy of any
election with their income tax return. section 83(b) election made with respect
Service, 1111 Constitution Avenue NW., Commercial software available for e-
Washington, DC, or sent electronically to property must be kept until the
filing income tax returns does not period of limitations expires for the
via the Federal eRulemaking Portal at consistently provide a mechanism for
http://www.regulations.gov/ (IRS REG– return that reports the sale or other
submitting a section 83(b) election with disposition of the property.
135524–14). an individual’s e-filed return. As a
FOR FURTHER INFORMATION CONTACT: result, an individual who has made a Explanation of Provisions
Concerning these proposed regulations, section 83(b) election may be unable to The proposed regulations would
Thomas Scholz or Michael Hughes at e-file his or her return and at the same remove the second sentence in § 1.83–
(202) 317–5600 (not a toll-free number); time comply with the requirement in 2(c) of the existing regulations. This
concerning submissions of comments, § 1.83–2(c) that a copy of the section would eliminate the requirement that
and/or to request a hearing, Regina 83(b) election be submitted with the taxpayers submit a copy of a section
Johnson, at (202) 317–6901 (not a toll- return. An individual who made a 83(b) election with their tax return for
free number). section 83(b) election would be required the year in which the property subject
SUPPLEMENTARY INFORMATION: to paper file his or her income tax return to the election was transferred.
to comply with the requirements under
Background Proposed Effective Date
§ 1.83–2(c).
Section 83(a) of the Internal Revenue Since the introduction of the e-file These regulations under section 83
Code (Code) provides generally that if, program, the IRS has encouraged are proposed to apply as of January 1,
in connection with the performance of taxpayers to file returns electronically. 2016, and would apply to property
services, property is transferred to any The e-file program reduces the amount transferred on or after that date.
person other than the person for whom of paper the government must process, Taxpayers may rely on these proposed
such services are performed, the excess and this reduction of paper processing regulations for property transferred on
of the fair market value of the property allows the IRS to be more efficient and
mstockstill on DSK4VPTVN1PROD with PROPOSALS

or after January 1, 2015.
(determined without regard to any use valuable resources to address other
restriction other than a restriction which critical work. Special Analyses
by its terms will never lapse) as of the In order to remove this obstacle to e- It has been determined that this notice
first time that the transferee’s rights in filing an individual tax return, the of proposed rulemaking is not a
the property are transferable or are not proposed regulations would eliminate significant regulatory action as defined
subject to a substantial risk of forfeiture, the requirement under § 1.83–2(c) that a in Executive Order 12866. Therefore, a
whichever occurs earlier, over the copy of the section 83(b) election be regulatory assessment is not required. It
amount (if any) paid for the property is submitted with an individual’s tax also has been determined that section

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42440 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Proposed Rules

553(b) of the Administrative Procedure revenue office with which the person Department of Transportation, West
Act (5 U.S.C. chapter 5) does not apply who performed the services files his Building Ground Floor, Room W12–140,
to these regulations, and because the return. 1200 New Jersey Avenue SE.,
regulations do not impose a collection * * * * * Washington, DC 20590–0001. Deliveries
of information on small entities, the (g) Effective/applicability date. accepted between 9 a.m. and 5 p.m.,
Regulatory Flexibility Act (5 U.S.C. Paragraph (c) of this section applies to Monday through Friday, except federal
chapter 6) does not apply. Pursuant to property transferred on or after January holidays. The telephone number is 202–
section 7805(f) of the Code, these 1, 2016. 366–9329.
regulations have been submitted to the See the ‘‘Public Participation and
Chief Counsel for Advocacy of the Small John M. Dalrymple, Request for Comments’’ portion of the
Business Administration for comment Deputy Commissioner for Services and SUPPLEMENTARY INFORMATION section
on their impact on small business. Enforcement. below for further instructions on
[FR Doc. 2015–17530 Filed 7–16–15; 8:45 am] submitting comments. To avoid
Comments and Request for Public BILLING CODE 4830–01–P duplication, please use only one of
Hearing these three methods.
Before these proposed regulations are FOR FURTHER INFORMATION CONTACT: If
adopted as final regulations, DEPARTMENT OF HOMELAND you have questions on this rule, call or
consideration will be given to any SECURITY email LTJG Johnny Zeng, Waterways
comments that are timely submitted to Management Division, Sector Puget
the IRS as prescribed in this preamble Coast Guard Sound, U.S. Coast Guard; telephone
under the ADDRESSES heading. The (206) 217–6175, email
Treasury Department and the IRS 33 CFR Part 165 SectorPugetSoundWWM@uscg.mil. If
request comments on all aspects of the [Docket Number USCG–2015–0004] you have questions on viewing or
proposed rules. All comments will be submitting material to the docket, call
available at www.regulations.gov or RIN 1625–AA11 Cheryl Collins, Program Manager,
upon request. A public hearing will be Docket Operations, telephone (202)
scheduled if requested in writing by any Regulated Navigation Area; Middle 366–9826.
person that timely submits written or Waterway Superfund Cleanup Site,
SUPPLEMENTARY INFORMATION:
electronic comments. If a public hearing Commencement Bay; Tacoma, WA
is scheduled, notice of the date, time, Table of Acronyms
AGENCY: Coast Guard, DHS.
and place for the hearing will be ACTION: Notice of proposed rulemaking. DHS Department of Homeland Security
published in the Federal Register. FR Federal Register
SUMMARY: The Coast Guard proposes to NPRM Notice of Proposed Rulemaking
Drafting Information
establish a regulated navigation area A. Public Participation and Request for
The principal authors of these (RNA) on the Middle Waterway in Comments
proposed regulations are Thomas Scholz Tacoma, Washington. The RNA will
and Michael Hughes, Office of the protect the sediment cap areas in the We encourage you to participate in
Associate Chief Counsel (Tax Exempt U.S. Environmental Protection Agency this rulemaking by submitting
and Government Entities). However, (EPA)’s Commencement Bay Nearshore/ comments and related materials. All
other personnel from the IRS and the Tideflats (CB–NT) Superfund Cleanup comments received will be posted
Treasury Department participated in Site in the Middle Waterway Problem without change to http://
their development. Area. This regulated navigation area www.regulations.gov and will include
would prohibit activities that could any personal information you have
List of Subjects 26 CFR Part 1 provided.
disrupt the integrity of the engineered
Income taxes, Reporting and sediment caps that have been placed 1. Submitting comments
recordkeeping requirements. within the Middle Waterway Problem If you submit a comment, please
Proposed Amendments to the Area. These activities include vessel include the docket number for this
Regulations grounding, anchoring, dragging, rulemaking, indicate the specific section
trawling, spudding or other such of this document to which each
Accordingly, 26 CFR part 1 is activities that would disturb the
proposed to be amended as follows: comment applies, and provide a reason
integrity of the sediment caps. It will for each suggestion or recommendation.
PART 1—INCOME TAXES not affect transit or navigation of this You may submit your comments and
area or the existing industrial activities material online at http://
■ Paragraph 1. The authority citation for occurring in this area. www.regulations.gov, or by fax, mail, or
part 1 continues to read in part as DATES: Comments and related material hand delivery, but please use only one
follows: must be received by the Coast Guard on of these means. If you submit a
Authority: 26 U.S.C. 7805 * * *
or before October 15, 2015. Requests for comment online, it will be considered
public meetings must be received by the received by the Coast Guard when you
■ Par. 2. Section 1.83–2 is amended by Coast Guard on or before August 17,
revising paragraph (c) and adding successfully transmit the comment. If
2015. you fax, hand deliver, or mail your
mstockstill on DSK4VPTVN1PROD with PROPOSALS

paragraph (g) to read as follows:
ADDRESSES: You may submit comments comment, it will be considered as
§ 1.83–2 Election to include in gross identified by docket number using any having been received by the Coast
income in year of transfer. one of the following methods: Guard when it is received at the Docket
* * * * * (1) Federal eRulemaking Portal: Management Facility. We recommend
(c) Manner of making election. The http://www.regulations.gov. that you include your name and a
election referred to in paragraph (a) of (2) Fax: 202–493–2251. mailing address, an email address, or a
this section is made by filing one copy (3) Mail or Delivery: Docket telephone number in the body of your
of a written statement with the internal Management Facility (M–30), U.S. document so that we can contact you if

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Document Created: 2018-02-23 09:21:37
Document Modified: 2018-02-23 09:21:37

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking.
Dates		Comments must be received by October 15, 2015.
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).
FR Citation		80 FR 42439
RIN Number		1545-BM63
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements

80 FR 42439 - Property Transferred in Connection With the Performance of Services

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 80, Issue 137 (July 17, 2015)

DEPARTMENT OF THE TREASURY
Internal Revenue Service