A timely section 83(b) election revocation was approved

Plain-English summary

An employee received restricted employer stock and filed an election under section 83(b) covering all of the shares. The employee then asked to revoke the election less than 30 days after the stock transfer. Section 83(b) generally requires an election within 30 days, and revocation requires IRS consent. Revenue Procedure 2006-31 states that consent generally will be granted when the revocation request is filed by the election's original due date. Because the employee requested revocation within that 30-day period, the IRS granted consent.

Ruling snapshot

• Question: Could the taxpayer revoke a section 83(b) election within the original 30-day election period?
• Outcome: Approved, consent to revoke was granted
• Key authorities: IRC § 83(b); Treas. Reg. § 1.83-2(f); Rev. Proc. 2006-31, § 2.08

Full text (IRS public release)

Internal Revenue Service                         Department of the Treasury
                                                 Washington, DC 20224

Number: 201625010                                Third Party Communication: None
Release Date: 6/17/2016                          Date of Communication: Not Applicable
Index Number: 83.02-04
                                                 Person To Contact:
--------------------                             ---------------------------
----------------------------------               Telephone Number:
-----------------------------                    ----------------------
                                                 Refer Reply To:
                                                 CC:TEGE:EB:EC
                                                 PLR-138634-15
                                                 Date:
                                                 March 14, 2016

Legend

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

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

      This letter is in response to your request, dated November 27, 2015, 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, subject to a substantial risk of forfeiture. 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 November 27, 2015, 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
PLR-138634-15                                 2

property, as compensation for services. Under § 83(b)(2) of the Code, an election
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 ------.

                                                  Sincerely,

                                                                /S/


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