Final regulations - Property transferred in connection with performance of services under section 83 

February 25:  The Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9659) relating to property transferred in connection with the performance of services under section 83.

Today’s release finalizes regulations that were proposed in May 2012, to clarify that a substantial risk of forfeiture could be established only through a service condition or a condition related to the purpose of the transfer.

The final regulations [PDF 32 KB] generally adopt the regulations as proposed, but with a revision made to clarify an example in response to a question concerning whether the purchase of shares in a transaction not exempt from section 16(b) of the Securities Exchange Act of 1934, prior to the exercise of a stock option that would not otherwise give rise to section 16(b) liability, would defer taxation of the stock option exercise. The preamble explains that Treasury and the IRS do not believe that such a non-exempt purchase of shares would defer taxation of the subsequent stock option exercise, and an example contained in the regulations is revised to reflect this position.

The final regulations apply to property transferred on or after January 1, 2013.

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