Code Sec. 83 and 83(b) Elections: Tax Planning for Closely Held Businesses (Currently Unavailable)

Author: Steven G. Siegel

Master Rules for Transferring Stock to Employees

This two-hour CPE provides a practical examination of Code Section 83 and important tax ramifications and considerations for employers and employees who transfer and receive stock that may be subject to a substantial risk of forfeiture.

Transferring stock to employees is often a great business move, but making the Code Sec. 83(b) election could turn it into a great tax move as well for both the employee and the employer. Moving income from ordinary income to capital gains for tax treatment is a desirable tax planning goal. When a business transfers stock to an employee as compensation and includes conditions on the transfer, the value of the stock may not be immediately treated as compensation to the employee or deductible by the employer. When the conditions are satisfied, the stock is then income to the employee. A Sec. 83(b) election allows the employee to report compensation income on the value of the stock when received, and then allow a future sale to be treated as a capital gain. The election can be beneficial to both employer and employee. But there are potential pitfalls and recordkeeping and filing hurdles that must be navigated to ensure that the election is successful.

Publication Date: July 2020

Designed For
Accountants, tax attorneys and advisors who work with closely held businesses

Topics Covered

• General Rules of Code Section 83
• What Is a 'Substantial Risk of Forfeiture'?
• Exceptions to Code Section 83
• Final Section 83 Regulations ” 2014
• The Section 83(b) Election
• Section 83 and Partnership Interests Received in Exchange for Services

Learning Objectives

• Identify and apply a solid base of knowledge regarding Code Section 83
• Recognize the substantial risk of forfeiture when transfers of stock are made to employees
• Describe factors that are taken into account regarding transfers of property to a corporate owner-employee and if there is a risk
• Recognize factors considered by the IRS to determine if a transfer has taken place

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic understanding of federal income taxes

Advance Preparation
None