83(b) Election - When IRS permits Taxpayer to Revoke
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In PLR 201109013 (Nov. 8, 2010) the IRS permits the taxpayer to revoke an 83(b) election. Generally a taxpayer cannot revoke an 83(b) election without showing mutual mistake or some other flaw in understanding the transaction. However, during the 30-day period in which the election can be made, the IRS also permits revocation of an election. In this instance, the taxpayer revoked the election within the 30-day period. A rare situation, but nonetheless worth knowing about, particularly if at an emerging company that provides equity compensation.
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Thanks Tahir,
What responsibility does the individual have to notify the company of the revocation and what form must this take?
Dan
The taxpayer has an obligation to notify the employer so that both are taking the same tax position (in this case, that any compensation from the transfer will be recognized in a later year, not the year of transfer). A copy of the IRS consent to the revocation should be furnished.
Do you think that as a best practice companies that generally promote the concept of 83(b) elections should include some type of documentation regarding revocation procedures?
An interesting question. I think it's a "nice to have" but not a requirement. Instructions on making an 83(b) election should note that that the election can only be revoked with the consent of the IRS and that if such a revocation is sought and obtained, then the employer should be given a copy of the revocation.