[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.83-2]

[Page 311-313]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
COMPUTATION OF TAXABLE INCOME--Table of Contents
 
Sec. 1.83-2  Election to include in gross income in year of transfer.

    (a) In general. If property is transferred (within the meaning of 
Sec. 1.83-3(a)) in connection with the performance of services, the 
person performing such services may elect to include in gross income 
under section 83(b) the excess (if any) of the fair market value of the 
property at the time of transfer (determined without regard to any lapse 
restriction, as defined in Sec. 1.83-3(i)) over the amount (if any) paid 
for such property, as compensation for services. The fact that the 
transferee has paid full value for the property transferred, realizing 
no bargain element in the transaction, does not preclude the use of the 
election as provided for in this section. If this election is made, the 
substantial vesting rules of section 83(a) and the regulations 
thereunder do not apply with respect to such property, and except as 
otherwise provided in section 83(d)(2) and the regulations thereunder 
(relating to the cancellation of a nonlapse restriction), any subsequent 
appreciation in the value of the property is not taxable as compensation 
to the person who performed the services. Thus,

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property with respect to which this election is made shall be includible 
in gross income as of the time of transfer, even though such property is 
substantially nonvested (as defined in Sec. 1.83-3(b)) at the time of 
transfer, and no compensation will be includible in gross income when 
such property becomes substantially vested (as defined in Sec. 1.83-
3(b)). In computing the gain or loss from the subsequent sale or 
exchange of such property, its basis shall be the amount paid for the 
property increased by the amount included in gross income under section 
83(b). If property for which a section 83(b) election is in effect is 
forfeited while substantially nonvested, such forfeiture shall be 
treated as a sale or exchange upon which there is realized a loss equal 
to the excess (if any) of--
    (1) The amount paid (if any) for such property, over,
    (2) The amount realized (if any) upon such forfeiture.

If such property is a capital asset in the hands of the taxpayer, such 
loss shall be a capital loss. A sale or other disposition of the 
property that is in substance a forfeiture, or is made in contemplation 
of a forfeiture, shall be treated as a forfeiture under the two 
immediately preceding sentences.
    (b) Time for making election. Except as provided in the following 
sentence, the election referred to in paragraph (a) of this section 
shall be filed not later than 30 days after the date the property was 
transferred (or, if later, January 29, 1970) and may be filed prior to 
the date of transfer. Any statement filed before February 15, 1970, 
which was amended not later than February 16, 1970, in order to make it 
conform to the requirements of paragraph (e) of this section, shall be 
deemed a proper election under section 83(b).
    (c) Manner of making election. The election referred to in paragraph 
(a) of this section is made by filing one copy of a written statement 
with the internal revenue office with whom the person who performed the 
services files his return. In addition, one copy of such statement shall 
be submitted with this income tax return for the taxable year in which 
such property was transferred.
    (d) Additional copies. The person who performed the services shall 
also submit a copy of the statement referred to in paragraph (c) of this 
section to the person for whom the services are performed. In addition, 
if the person who performs the services and the transferee of such 
property are not the same person, the person who performs the services 
shall submit a copy of such statement to the transferee of the property.
    (e) Content of statement. 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:
    (1) The name, address and taxpayer identification number of the 
taxpayer;
    (2) A description of each property with respect to which the 
election is being made;
    (3) The date or dates on which the property is tansferred and the 
taxable year (for example, ``calendar year 1970'' or ``fiscal year 
ending May 31, 1970'') for which such election was made;
    (4) The nature of the restriction or restrictions to which the 
property is subject;
    (5) The fair market value at the time of transfer (determined 
without regard to any lapse restriction, as defined in Sec. 1.83-3(i)) 
of each property with respect to which the election is being made;
    (6) The amount (if any) paid for such property; and
    (7) 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 paragraph (d) of this section.
    (f) Revocability of election. An election under section 83(b) may 
not be revoked except with the consent of the Commissioner. Consent will 
be granted only in the 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 of fact first became known to the 
person who made the election. In any event, a mistake as to the value, 
or decline in the value, of the property with respect to which an 
election under section 83(b) has been made or a failure to perform an 
act contemplated at the

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time of transfer of such property does not constitute a mistake of fact.

[T.D. 7554, 43 FR 31915, July 24, 1978]