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(1) the fair market value of such property
(determined without regard to any restriction
other than a restriction which by its terms will
never lapse) at the first time the rights of the
person having the beneficial interest in such
property are transferable or are not subject to a
substantial risk of forfeiture, whichever occurs
earlier, over
(2) the amount (if any) paid for such
property,
shall be included in the gross income of the person who
performed such services in the first taxable year in
which the rights of the person having the beneficial
interest in such property are transferable or are not
subject to a substantial risk of forfeiture, whichever
is applicable. * * *
* * * * * * *
(h) Deduction by Employer.--In the case of a
transfer of property to which this section applies
* * *, there shall be allowed as a deduction under
section 162, to the person for whom were performed the
services in connection with which such property was
transferred, an amount equal to the amount included
under subsection (a) * * * in the gross income of the
person who performed such services. Such deduction
shall be allowed for the taxable year of such person in
which or with which ends the taxable year in which such
amount is included in the gross income of the person
who performed such services.
The legislative history to section 83 reveals that it was enacted
primarily to set forth rules on the tax treatment of deferred
compensation arrangements known as restricted stock plans; i.e.,
arrangements under which employers transfer stock to their
employees as compensation for services, where the stock is
subject to restrictions which affect its value. S. Rept. 91-552,
at 253, 256-263 (1969), 1969-3 C.B. 423, 500-503. Section 83 was
not meant, however, to reach only restricted stock. The
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