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

Author: Steven G. Siegel

This course 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.

Presented by noted tax planner, author and educator, Steve Siegel, J.D., LL.M., this program will help closely held businesses and their advisors navigate the potential minefields and understand the concept of a substantial risk of forfeiture in light of regulations issued in 2014. Siegel, an outstanding speaker and presenter, will provide practical explanations and tips on this important topic, so you can advise your clients with confidence.

Publication Date: May 2017

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? (Including the 2014 Regulations)
• How Are Restricted Property Transfers Taxed?
• Stock Options
• Section 83 and Deferred Compensation Plans (Code Section 409A)
• Exceptions to Code Section 83
• Final Regulations Offer New Guidance in 2014
• The Section 83(b) Election — Elect to Pay Tax When the Transfer Occurs
• Can the Election be Revoked?
• Effects of the Section 83(b) election on the Employee
• Section 83 and Partnership Interests Received in Exchange for Services
• The Tax Consequences of Special Situations Involving Stock Options, Restricted Stock Awards, and Partnership Interests in Profits and Capital

Learning Objectives

• Recognize a solid base of knowledge regarding Code Section 83
• Identify the substantial risk of forfeiture when transfers of stock are made to employees
• Describe when a service provider would be taxed on compensation income
• Recognize when an employed would not be able to take a deduction
• Differentiate when a service provider may or may not benefit from taking a Section 83(b) election
• Identify when Section 83 (b) election can be revoked
• Recognize the issuance of a partnership interest is not a taxable event under Revenue Procedure 93-27
• Differentiate factors in determining substantial risk of forfeiture
• Identify when the economic benefit doctrine may or may not apply
• Describe service provider's basis in a property
• Recognize when the holding period of restricted property begins
• Identify when a non-statutory stock option is taxable
• Differentiate when transfer restrictions do not create a substantial risk of forfeiture based on transfer conditions
• Recognize the purpose of the Section 83(b) election and when it must be made
• Identify the deductions an employer can claim on a deduction of property
• Describe the proper time to test whether a partnership interest is a capital interest of a profits interest

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic understanding of federal income taxes.

Advance Preparation
None