Missing return attachment does not invalidate section 83(b) election

Plain-English summary

A service provider bought units in a company and mailed a section 83(b) election to the IRS within 30 days of the transfer. The election contained the required information, but the taxpayer did not attach a copy to the income tax return for the year of transfer. The IRS ruled that the timely filed statement created a valid election and that omitting the return copy did not invalidate it. The taxpayer was instructed to send a copy for association with the return.

Ruling snapshot

• Question: Does a timely section 83(b) election remain valid when the taxpayer fails to attach a copy to the return for the year of transfer?
• Outcome: Approved
• Key authorities: IRC § 83(a), (b); Treas. Reg. § 1.83-2(c), (d), (e)

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201528001                                              Third Party Communication: None
Release Date: 7/10/2015                                        Date of Communication: Not Applicable
Index Number: 83.00-00
                                                               Person To Contact:
-------------------------------------------------              -------------------------
--------------------------                                     Telephone Number:
---------------------------------                              --------------------
                                                               Refer Reply To:
                                                               CC:TEGE:EB:EC
                                                               PLR-100468-15
                                                               Date:
                                                               March 24, 2015


Legend

Year 1            =   ------
Date 1            =   ----------------------
X                 =   ---
Company A         =   --------------------------------------
Date 2            =   ------------------------
Date 3            =   ------------------------




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

This is in response to a request for a private letter ruling, dated December 23, 2014,
submitted on your behalf by your authorized representative, requesting a ruling under
section 83(b) of the Internal Revenue Code (Code). Specifically, you request a ruling
that an election made under section 83(b) of the code was timely filed, notwithstanding
your failure to attach a copy of the election to your Year 1 tax return. The facts, as
represented, are as follows.

On Date 1, you purchased X units in Company A, for whom you provided services. On
Date 2, you executed an election pursuant to section 83(b) of the Internal Revenue
Code. The election met the content requirements of section 1.83-2(e) of the Income
Tax Regulations (Regulations). This election was filed by with the Internal Revenue
Service on Date 3, within 30 days of the date of transfer. When your tax return was
prepared for Year 1, you failed to attach a copy of your election. As a result, a copy of
your election was not submitted with your Year 1 tax return, as required by section 1.83-
2(c) of the regulations.
PLR-100468-15                                 2

Section 83 of the Code provides rules for the taxation of property transferred to an
individual in connection with the performance of services. Section 83(a) of the Code
provides 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 fair
market value of the property (less the amount paid for the property) shall be included in
the gross income of the recipient in the first taxable year in which the recipient’s interest
in the property is not subject to a substantial risk of forfeiture.

Section 83(b)(1) of the Code provides that any person who performs services in
connection with which property is transferred may elect to include in gross income for
the taxable year of the transfer the excess of the fair market value of the property over
the amount paid for it. Section 83(b)(2) of the Code provides that an election made
pursuant to section 83(b)(1) shall be made in the manner prescribed by the Secretary
and shall be made not later than 30 days after the date of the transfer.

Section 1.83-2(c) of the Regulations provides that a section 83(b) election is made by
filing one copy of a written statement with the Internal Revenue office with whom the
taxpayer files his return. In addition, one copy of such statement shall be submitted with
the income tax return for the year of transfer.

Section 1.83-2(d) of the Regulations provides that the person who performed the
services shall also submit a copy of the statement to the person for whom the services
are performed.

Section 1.83-2(e) of the Regulations provides that the statement shall be signed by the
person making the election and shall indicate that it is being made under section 83(b)
of the Code, and shall contain the following information: the name, address and
taxpayer identification number of the taxpayer; a description of each property with
respect to which the election is being made; the date or dates on which the property is
transferred and the taxable year for which such election was made; the nature of the
restriction or restrictions to which the property is subject; the fair market value at the
time of transfer of each property with respect to which the election is being made; the
amount (if any) paid for such property; and, with respect to elections made after July 21,
1978, a statement to the effect that copies have been furnished to other persons as
provided in section 1.83-2(d) of the Regulations.

Based on the representations made and after consideration of the provisions of sections
83(b) of the Code and 1.83-2 of the Regulations we have determined that you fulfilled
the requirements for a valid election under section 83(b) when your statement was
mailed to the Internal Revenue office on Date 3. Failure to submit a copy of the
statement with your Year 1 tax return did not affect the validity of the election. We
therefore conclude that, to the extent that your receipt of Company A stock on Date 1
constituted a transfer of property under section 83 of the Code, your election under
section 83(b) with respect to that stock remains in effect.
PLR-100468-15                                    3


We ask that you now forward a copy of the statement to the Internal Revenue office with
which you file your tax returns to be associated with your Year 1 tax return.

Except as expressly provided herein, no opinion is expressed or implied as to the
federal tax consequences of the facts described above under any other provision of the
Code.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

A copy of this letter must be attached to any income tax return to which it is relevant.

This ruling is based on the information and representations submitted by your
authorized representative and accompanied by a penalty of perjury statement executed
by you. While this office has not verified any of the material submitted in support of the
request for rulings, it is subject to verification on examination.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.



                                           Sincerely yours,

                                           /S/

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




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