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applicable.10 Petitioner's transfers come within the exception
in subparagraph (3).
The majority suggests that the exception in subparagraph (3)
overrides the explicit statutory timing requirements in section
83(h) but does not override the withholding requirements in
section 1.83-6(a)(2), Income Tax Regs. This is a non sequitur.
Section 1.83-6(a)(2), Income Tax Regs., imposes a withholding
requirement, but only in connection with the application of its
specific timing provisions. Thus, in the only sentence that has
any application to this case, the regulation provides:
10Sec. 83(h) requires that any deduction by the service
recipient be allowed "for the taxable year of such person [the
service recipient or employer] 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." In light of the
explicit timing provisions of sec. 83(h), how can the exception
in subparagraph (3) be justified? The original version of sec.
83 introduced in the House of Representatives contained no
provision regarding deductions for property transferred in return
for services. What is now sec. 83(h) was first introduced by the
Senate Finance Committee. The Senate report states:
The committee provided rules for the employer's
deduction for restricted property given to employees as
compensation. The allowable deduction is the amount
which the employee is required to recognize as income.
* * * [S. Rept. 91-552, at 123 (1969), 1969-3 C.B. 423,
502; emphasis added.]
It is therefore possible that the U.S. Treasury Department
concluded that sec. 83(h) was not intended to affect deductions
based on the transfers of unrestricted property.
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