Employee may revoke section 83(b) election within filing period

Plain-English summary

An employee received restricted employer stock and filed a § 83(b) election covering all of the shares. Less than 30 days after the stock transfer, the employee asked the IRS for permission to revoke the election. IRS procedure generally permits revocation requests made by the original deadline for the election. Because the employee requested revocation within that 30-day period, the IRS granted consent.

Ruling snapshot

• Question: May the employee revoke a § 83(b) election before the 30-day election deadline expires?
• Outcome: Approved
• Key authorities: IRC § 83(b); Treas. Reg. § 1.83-2(f); Rev. Proc. 2006-31

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201441006
Third Party Communication: None
Release Date: 10/10/2014
Date of Communication: Not Applicable
Index Number: 83.02-04
Person To Contact:
------------------------
---------------------------
------------------------
Telephone Number:
----------------------------------
----------------------
Refer Reply To:
CC:TEGE:EB:EC
PLR-118264-14
Date:
July 08, 2014

Legend

Date 1 = ----------------------
x = ----------
Employer = -------------------------------------- Date 2 = ----------------------

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

This letter is in response to your request, dated April 8, 2014, 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 Date 2, 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 April 8, 2014, less than 30 days after Date 1, 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-118264-14 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 2014.

Sincerely,

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