IRS proposes updates to IRC 6039 - Comment period ends October 15, 2008

http://www.planadviser.com/compliance/article.php/2569

IRS Proposes Reporting Requirements for Stock Purchase Plans

Rebecca Moore – 07/17/2008

The Internal Revenue Service issued proposed regulations for corporations that issue statutory stock options.

The
regulations would provide guidance to assist corporations in complying
with the return and information statement requirements under Internal
Revenue Code section 6039.

In REG-103146-08, the IRS said that with respect to
a transfer of stock upon the exercise of an incentive stock option, the
information required to be furnished to employees under existing
regulations is sufficient to enable the employee to calculate his or
her tax obligations upon disposition of the shares. Therefore, the
information required in the information return and employee statement
by the proposed regulations is generally the same as current
requirements.

However, with respect to an employee's transfer of
stock acquired under an employee stock purchase plan, the information
required to be furnished by existing regulations is not sufficient to
enable the employee to calculate his or her tax obligations upon
disposition of the shares, the agency said. In the proposal, additional
information that would be required for the information return and the
statement furnished to employees is:

• the date the option was granted to the transferor;


• the fair market value of the stock on the date the option was granted;


• the exercise price per share;


• the date the option was exercised by the transferor;


• the fair market value of the stock on the date the option was exercised by the transferor.

According to the IRS, this additional
information, along with the information required under the existing
regulations, will enable an employee to determine his or her tax
obligations upon the disposition of shares.

Returns as well as information statements to
employees must be submitted by corporations by January 31 of the year
following the calendar year for which the return is made. The proposed
regulations would apply to any stock transfer occurring on or after
January 1, 2007.

The IRS said it expects to release forms to facilitate the filing of these returns later this year.

The agency is requesting comments on the proposed
rules by October 15. Methods for submitting comments are listed in the
regulation, which is available here.