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In the case at hand, the Commissioner has prescribed an
employer-friendly regulatory rule with respect to section 83(h).
The Commissioner's regulations, however, do not help petitioner
under the facts herein. The applicable regulations are found in
section 1.83-6, Income Tax Regs. These regulations, which are
generally effective for transfers of property after June 30,
1969, T.D. 7554, 1978-2 C.B. 71, 82, read:
�1.83-6. Deduction by employer.
(a) Allowance of deduction--(1) General rule. In
the case of a transfer of property in connection with
the performance of services * * *, a deduction is
allowable under section 162 or 212, to the person for
whom such services were performed. The amount of the
deduction is equal to the amount includible as
compensation in the gross income of the service
provider, under section 83(a) * * *, but only to the
extent such amount meets the requirements of section
162 or 212 and the regulations thereunder. Such
deduction shall be allowed only for the taxable year of
such person in which or with which ends the taxable
year of the service provider in which such amount is
includible as compensation. * * *
(2) Special Rule.--If the service provider is an
employee of the person for whom services were
performed, such deduction is allowed for the taxable
year of the employer in which or with which ends the
taxable year of the employee in which such amount is
includible as compensation, but only if the employer
deducts and withholds upon such amount in accordance
with section 3402. A deduction will not be disallowed
under the preceding sentence if the employer does not
withhold and deduct upon amounts excluded from gross
income, such as amounts excluded under section 79,
section 101(b), or subchapter N. * * *
(3) Exceptions.--Where property is substantially
vested upon transfer, the deduction shall be allowed to
such person in accordance with his method of accounting
(in conformity with section 446 and 461). * * *
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