PLR 1322007: IRS permits revocation of a section 83(b) election

Plain-English summary

The IRS consented to a taxpayer's revocation of an election under section 83(b) concerning shares of employer stock received for services. The taxpayer requested revocation within the 30-day period allowed for making the election. Based on the submitted representations and information, the IRS granted consent to revoke the election. The ruling did not address other federal tax consequences under section 83 or any other Code provision.

Ruling snapshot

• Question: Could the taxpayer revoke the section 83(b) election concerning the employer stock?
• Outcome: Approved
• Key authorities: IRC § 83; Treas. Reg. § 1.83-2; Rev. Proc. 2006-31; IRC § 6110(k)(3).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201322007 Third Party Communication: None
Release Date: 5/31/2013 Date of Communication: Not Applicable
Index Number: 83.02-04
Person To Contact:
------------------- ---------------------------
--------------------------------- Telephone Number:
-------------------------------- ----------------------
Refer Reply To:
CC:TEGE:EB:EC
PLR-128464-12
Date:
February 20, 2013

Legend

Date 1 = -------------------
x = ------------
Employer = -------------------------

Dear -----------------:

  This letter is in response to your request, dated June 28, 2012, in which you

asked for consent to revoke an election you made under § 83(b) of the Internal
Revenue Code (Code). The facts, as represented, are as follows.

   On Date 1, you were granted an award of x shares of Employer common stock

by Employer. On that date, you filed an election under § 83(b) of the Code with the
Internal Revenue Service Center where you file your individual tax return. The § 83(b)
election referenced all x shares of the common stock received from Employer on Date

1. On June 28, 2012, you sent a letter to this office requesting consent to revoke your
   § 83(b) election.

   Section 83 of the Code sets forth the rules for transfers of property in connection
   with the performance of services. Section 83(a) provides that the excess of the fair
   market value of the property transferred, at the time the property becomes substantially
   vested, over the amount (if any) paid for the property, shall be included as
   compensation in the service provider's gross income for the taxable year in which the
   property becomes substantially vested. Property is substantially vested when it is either
   transferable or no longer subject to a substantial risk of forfeiture.

   Section 83(b) of the Code and § 1.83-2(a) of the Income Tax Regulations permit
   the service provider to elect to include in gross income 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, as compensation for services. Under § 83(b)(2) of the Code, an election
   PLR-128464-12 2

made under § 83(b) must be made in accordance with the regulations thereunder and
must be filed with the Internal Revenue Service no later than 30 days after the date that
the property is transferred to the service provider.

   Section 83 of the Code and § 1.83-2(f) of the Income Tax Regulations provide

that an election under § 83(b) may not be revoked without the consent of the
Commissioner of the Internal Revenue Service. Section 1.83-2(f) provides that consent
to revoke an election under § 83(b) will be granted only in a case where the transferee
is under a mistake of fact as to the underlying transaction and must be requested within
60 days of the date on which the mistake first became known to the person who made
the election. The Service has recognized the principle that an election made under the
Code or regulations may be revoked on or before the due date for making the election.
Section 2.08 of Rev. Proc. 2006-31, 2006-1 I.R.B. 32, provides that a request for
consent to revoke a § 83(b) election will generally be granted if the request is filed on or
before the due date for making that § 83(b) election.

   In the instant case, you filed your request to revoke your § 83(b) election within

the 30 day time period allowed under § 83(b) for making the election. Based solely on
the representations provided, and the information and documents submitted, consent to
revoke your § 83(b) election is granted.

   Except as specifically ruled above, no opinion is expressed as to the federal tax

consequences of the transaction described above under any other provision of the
Code. Specifically, no opinion is expressed concerning other tax consequences of
section 83 and its applicability to the transaction described above.

   This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)

of the Code provides that it may not be used or cited as precedent. A copy of this letter
should be attached to your income tax return for 20----.

                                              Sincerely,




                                              THOMAS D. SCHOLZ
                                              Assistant Branch Chief
                                              Executive Compensation Branch
                                              Office of Division Counsel/Associate
                                              Chief Counsel (Tax Exempt and
                                              Government Entities)

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