81 FR 48707 - Property Transferred in Connection With the Performance of Services

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 143 (July 26, 2016)

Page Range		48707-48708
FR Document		2016-17591

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.

Federal Register, Volume 81 Issue 143 (Tuesday, July 26, 2016)

[Federal Register Volume 81, Number 143 (Tuesday, July 26, 2016)]
[Rules and Regulations]
[Pages 48707-48708]
From the Federal Register Online  [www.thefederalregister.org]
[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.

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

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]
 BILLING CODE 4830-01-P

Federal Register / Vol. 81, No. 143 / Tuesday, July 26, 2016 / Rules and Regulations 48707

(b) Iontophoresis device intended for (iii) Appropriate analysis/testing must services. Section 83(a) of the Code
any other purposes—(1) Identification. demonstrate electromagnetic provides generally that the excess of the
An iontophoresis device intended for compatibility, electrical safety, thermal fair market value of the transferred
any other purposes is a prescription safety, and mechanical safety. property (determined without regard to
device that is intended to use a current (iv) Appropriate software verification, any restriction other than a restriction
to introduce ions of drugs or non-drug validation, and hazard analysis must be which by its terms will never lapse) as
solutions into the body for medical performed. of the first time that the transferee’s
purposes other than those specified in (v) The elements of the device that rights in the property are transferable or
paragraph (a) of this section, meaning may contact the patient must be are not subject to a substantial risk of
that the device is not intended for use demonstrated to be biocompatible. forfeiture, whichever occurs earlier,
in diagnosis of cystic fibrosis, or a (vi) The elements of the device that over the amount (if any) paid for the
specific drug is not specified in the may contact the patient must be property is included in the service
labeling of the iontophoresis device. assessed for sterility, for devices labeled provider’s gross income for the taxable
(2) Classification. Class II (special as sterile. year which includes such time. Section
controls). The device is classified as (vii) Performance data must support 83(b) and § 1.83–2(a) permit the service
class II. The special controls for this the shelf life of the elements of the provider to elect to include in gross
device are: device that may be affected by aging by income, as compensation for services,
(i) The following performance testing demonstrating continued package the excess (if any) of the fair market
must be conducted: integrity and device functionality over value of the property at the time of
(A) Testing using a drug approved for the stated shelf life. transfer over the amount (if any) paid
iontophoretic delivery, or a solution, if Dated: July 20, 2016. for the property. Under section 83(b)(2),
identified in the labeling, to an election under section 83(b) must be
Leslie Kux,
demonstrate safe use of the device as made in accordance with the regulations
intended; Associate Commissioner for Policy. thereunder. Under § 1.83–2(c), the
(B) Testing of the ability of the device [FR Doc. 2016–17609 Filed 7–25–16; 8:45 am] election must be filed with the IRS no
to maintain a safe pH level; and BILLING CODE 4164–01–P later than 30 days after the date on
(C) If used in the ear, testing of the which the property is transferred, and a
device to demonstrate mechanical copy of the election must be submitted
safety. DEPARTMENT OF THE TREASURY with the taxpayer’s income tax return
(ii) Labeling must include adequate for the taxable year in which the
instructions for use, including sufficient Internal Revenue Service property is transferred.
information for the health care provider On July 17, 2015, the Department of
to determine the device characteristics 26 CFR Part 1 the Treasury (Treasury) and the Internal
that affect delivery of the drug or [TD 9779] Revenue Service (IRS) published a
solution and to select appropriate drug notice of proposed rulemaking (REG–
or solution dosing information for RIN 1545–BM63 135524–14) in the Federal Register (137
administration by iontophoresis. This FR 42439) under section 83 of the Code
includes the following: Property Transferred in Connection eliminating the requirement that a copy
(A) A description and/or graphical With the Performance of Services of a section 83(b) election be submitted
representation of the electrical output; AGENCY: Internal Revenue Service, with the taxpayer’s income tax return
(B) A description of the electrode Department of Treasury. for the taxable year in which the
materials and pH buffer; property is transferred. Treasury and the
ACTION: Final regulations.
(C) When intended for general drug IRS received no comments responding
delivery, language referring the user to SUMMARY: This document contains final to the notice of proposed rulemaking.
drug labeling approved for regulations relating to property No public hearing was requested and no
iontophoretic delivery to determine if transferred in connection with the public hearing was held. Treasury and
the drug they intend to deliver is performance of services. These final the IRS now adopt the proposed
specifically approved for use with that regulations affect certain taxpayers who regulations as final regulations without
type of device and to obtain relevant receive property transferred in modification.
dosing information; and connection with the performance of
(D) A detailed summary of the device- Explanation of Provisions
services and make an election to include
related and procedure-related the value of substantially nonvested These final regulations remove the
complications pertinent to use of the property in income in the year of second sentence in § 1.83–2(c) of the
device, and appropriate warnings and transfer. existing regulations, which requires that
contraindications, including the a taxpayer submit a copy of a section
following warning: DATES: Effective Date: These regulations 83(b) election with the taxpayer’s tax
Warning: Potential systemic adverse are effective on July 26, 2016. return for the year in which the property
effects may result from use of this Applicability Date: For dates of subject to the election was transferred.
device. Drugs or solutions delivered applicability, see § 1.83–2(g). Accordingly, under these final
with this device have the potential to FOR FURTHER INFORMATION CONTACT: regulations, a taxpayer is no longer
reach the blood stream and cause Thomas Scholz or Michael Hughes at required to file a copy of a section 83(b)
systemic effects. Carefully read all (202) 317–5600 (not a toll-free number). election with the taxpayer’s income tax
labeling of the drug or solution used
rmajette on DSK2TPTVN1PROD with RULES

SUPPLEMENTARY INFORMATION: return.
with this device to understand all Taxpayers are reminded of their
potential adverse effects and to ensure Background general recordkeeping responsibilities
appropriate dosing information. If Section 83 of the Internal Revenue pursuant to section 6001 of the Code,
systemic manifestations occur, refer to Code (Code) addresses the tax and more specifically of the need to
the drug or solution labeling for consequences of a transfer of property in keep records that show the basis of
appropriate action. connection with the performance of property owned by the taxpayer.

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48708 Federal Register / Vol. 81, No. 143 / Tuesday, July 26, 2016 / Rules and Regulations

Taxpayers must maintain sufficient entities, the Regulatory Flexibility Act DEPARTMENT OF LABOR
records to show the original cost of the (5 U.S.C. chapter 6) does not apply.
property and to support the tax Pursuant to section 7805(f) of the Code, Occupational Safety and Health
treatment of the property transfer these regulations have been submitted Administration
reported on the taxpayers’ returns. to the Chief Counsel for Advocacy of the
Taxpayers must keep these records as Small Business Administration for 29 CFR Parts 1910, 1915, and 1926
long as they may be needed for the comment on their impact on small [Docket No. OSHA–2010–0034]
administration of any provision of the business.
Code. Generally, this means records that RIN 1218–AB70
support items shown on a return must Drafting Information
be retained until the period of Occupational Exposure to Respirable
limitations for that return expires. See The principal authors of these final Crystalline Silica; Approval of
section 6501 of the Code. A copy of any regulations are Thomas Scholz and Collections of Information
section 83(b) election made with respect Michael Hughes, Office of the Associate AGENCY: Occupational Safety and Health
to property must be kept until the Chief Counsel (Tax Exempt and Administration (OSHA), Department of
period of limitations expires for any Government Entities). However, other Labor.
return with respect to which the income personnel from the IRS and the Treasury ACTION: Final rule; Office of
inclusion or basis of the property is participated in their development. Management and Budget’s (OMB)
relevant. List of Subjects 26 CFR Part 1 approval of collections of information.
Applicability Date SUMMARY: This rule is a technical
Income taxes, Reporting and
These regulations apply to property recordkeeping requirements. amendment announcing that OMB has
transferred on or after January 1, 2016. approved the collections of information
For transfers of property on or after Adoption of Amendments to the contained in OSHA’s standards for
January 1, 2015 and prior to January 1, Regulations Occupational Exposure to Respirable
2016, the preamble to the proposed Crystalline Silica and revising OSHA’s
regulations provides that taxpayers may Accordingly, 26 CFR part 1 is regulations to reflect that approval. The
rely on the guidance in the proposed amended as follows: OMB approval number is 1218–0266.
regulations (which is identical to the DATES: Effective July 26, 2016.
guidance contained in these final PART 1—INCOME TAXES
FOR FURTHER INFORMATION CONTACT:
regulations). Todd Owen, OSHA, Directorate of
■ Paragraph 1. The authority citation
Effect on Other Documents for Part 1 continues to read in part as Standards and Guidance, Room N–3609,
U.S. Department of Labor, 200
Rev. Proc. 2012–29 (IRB 2012–28, 49) follows:
Constitution Avenue NW., Washington,
states that a taxpayer making a section Authority: 26 U.S.C. 7805 * * * DC 20210; telephone (202) 693–2222.
83(b) election must submit a copy of the
election with his or her tax return for SUPPLEMENTARY INFORMATION: OSHA
■ Par. 2. Section 1.83–2 is amended by
the taxable year in which such property published a final rule for the
revising paragraph (c) and adding
was transferred. Effective as of July 26, Occupational Exposure to Respirable
paragraph (g) to read as follows:
2016, Rev. Proc. 2012–29 is revoked, in Crystalline Silica standards on March
part, to the extent it requires, § 1.83–2 Election to include in gross 25, 2016 (81 FR 16286), after
inconsistent with these final income in year of transfer. determining that employees exposed to
regulations, a taxpayer to submit a copy * * * * * respirable crystalline silica at the
of a section 83(b) election with his or previous permissible exposure limits
(c) Manner of making election. The face a significant risk of material
her income tax return.
election referred to in paragraph (a) of impairment to their health. The
Statement of Availability of IRS this section is made by filing one copy evidence in the record for this
Documents of a written statement with the internal rulemaking indicates that workers
Rev. Proc. 2012–29 is published in the revenue office with which the person exposed to respirable crystalline silica
Internal Revenue Bulletin (or who performed the services files his are at increased risk of developing
Cumulative Bulletin) and is available return. silicosis and other nonmalignant
from the Superintendent of Documents, * * * * * respiratory diseases, lung cancer, and
U.S. Government Printing Office, kidney disease. These requirements are
(g) Effective/applicability date. necessary to provide protection from
Washington, DC 20402, or by visiting
Paragraph (c) of this section applies to these hazards. The silica final rule
the IRS Web site at http://www.irs.gov.
property transferred on or after January becomes effective on June 23, 2016.
Special Analyses 1, 2016. Start-up dates for specific provisions are
Certain IRS regulations, including this John M. Dalrymple, set in § 1910.1053(l) for general industry
one, are exempt from the requirements and maritime and in § 1926.1153(k) for
Deputy Commissioner for Services and
of Executive Order 12866, as construction.
Enforcement.
supplemented and reaffirmed by Consistent with the Paperwork
Executive Order 13563. Therefore, a Approved: April 20, 2016. Reduction Act (PRA) (44 U.S.C. 3501–
regulatory impact assessment is not Mark J. Mazur, 3520), the Federal Register notice for
rmajette on DSK2TPTVN1PROD with RULES

required. It also has been determined Assistant Secretary of the Treasury (Tax the Occupational Exposure to
that section 553(b) of the Administrative Policy). Respirable Crystalline Silica final rule
Procedure Act (5 U.S.C. chapter 5) does [FR Doc. 2016–17591 Filed 7–25–16; 8:45 am] states that employers do not have to
not apply to these regulations, and BILLING CODE 4830–01–P comply with the collections of
because the regulations do not impose a information until OMB approves those
collection of information on small collections of information and the

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Document Created: 2018-02-08 08:00:46
Document Modified: 2018-02-08 08:00:46

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		Rules and Regulations
Action		Final regulations.
Dates		Effective Date: These regulations are effective on July 26, 2016.
Contact		Thomas Scholz or Michael Hughes at (202) 317-5600 (not a toll-free number).
FR Citation		81 FR 48707
RIN Number		1545-BM63
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements

81 FR 48707 - Property Transferred in Connection With the Performance of Services

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 81, Issue 143 (July 26, 2016)

DEPARTMENT OF THE TREASURY
Internal Revenue Service