Unfunded Deferred Compensation

<div class="Section1"><br /> <br /> IRS guidance interpreting the Section 83(i) tax deferral option requires employers to establish an escrow arrangement if they wish to provide employees with the opportunity to defer taxes under the code section. This escrow arrangement is designed to solve potential income tax withholding issues associated with the new rules. If the employee and employer do not agree to the escrow arrangement, the employee is not a qualified employee for purposes of the Section 83(i) deferral option.<br /> <br /> All deferral stock must be deposited in the escrow account before the end of the calendar year in which the Section 83(i) election is made, and must remain in the account until the employer recovers the income tax withholding obligation from the employer. At any time between the date of income inclusion under Section 83(i)(1)(B) and March 31 of the following year, the employer is permitted to remove from escrow and retain the number of shares of deferral stock with a fair market value equal to the income tax withholding obligation that has not been otherwise received from the employee.<br /> <br /> <hr /><br /> <br /> <strong>Planning Point:</strong> Practically, this escrow arrangement could force corporations to repurchase their own stock in order to satisfy the employee's income tax withholding obligations, potentially making the Section 83(i) deferral option less attractive for employers who may not wish to use their own funds to satisfy these obligations.<br /> <br /> <hr /><br /> <br /> Fair market value, for purposes of these rules, means the fair market value as determined under the Section 409A regulations, and is the fair market value of the shares at the time the corporations retains the shares held in escrow to satisfy the employee's income tax withholding obligations.<br /> <br /> After the employee has satisfied his or her income tax withholding obligations, the shares held in escrow must be delivered to the employee as soon as reasonably practicable.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.   Notice 2018-97.<br /> <br /> </div>

<div class="Section1">An ISO generally is not subject to ERISA's reporting requirements since it is usually not a covered ERISA "employee benefit plan." Therefore, a summary plan description need not be distributed to participants. An employer must furnish a statement to an employee on or before January 31 of the year following the year in which the employee exercises the ISO, stating details about the options granted.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.   IRC § 6039(a).<br /> <br /> </div>

<div class="Section1">Taxation of restricted stock is governed by IRC Section 83, even after the enactment of Section 409A, if structured properly. This is because restricted stock must be structured and issued subject to a Section 409A substantial risk of forfeiture (in addition to a Section 83 substantial risk of forfeiture) that also makes it eligible to claim the Section 409A &ldquo;short term deferral exception&rdquo; to escape Section 409A coverage requirements. The distribution must be made during the 409A exception safe harbor time period to claim this exception to Section 409A ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3541">3541</a>).<div class="Section1"><br /> <br /> Section&nbsp;83 restricted stock generally does not constitute taxable income to the employee at the time it is granted (unless at the time of the grant it is &ldquo;substantially vested,&rdquo; <em><em>see</em></em> below). An employee who receives restricted stock must include the fair market value of that stock in his or her income in the year the stock becomes &ldquo;substantially vested.&rdquo; The amount the employee paid for the restricted stock, if any, must be subtracted from this amount. Restricted stock becomes substantially vested in the year in which the stock becomes transferable or the stock is no longer subject to a Section&nbsp;83 substantial risk of forfeiture.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> Within 30 days of receiving the restricted stock, an employee may elect under IRC Section&nbsp;83(b) to be taxed on the fair market value of the stock currently, rather than in the year the stock becomes substantially vested. Any appreciation after the election is thereafter taxable as a capital gain. If the restricted stock is ultimately forfeited, no deduction is allowed for that forfeiture.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> Where restricted stock that is substantially vested is subjected to new restrictions that cause it to become substantially nonvested, the stock is not subject to IRC Section&nbsp;83(b) in the absence of an exchange of stock. Where substantially vested stock is exchanged for substantially nonvested stock, the new restricted stock is subject to IRC Section&nbsp;83(b).<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> An employer is entitled to a corresponding deduction in the same amount and at the same time as the ordinary income recognized by the employee.<a href="#_ftn4" name="_ftnref4">⁴</a> Compensation paid in the form of restricted stock normally triggers the receipt of wages for the purpose of employment tax and withholding provisions in the amount of the income generated under IRC Section&nbsp;83(a).<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> On May&nbsp;29, 2012, the IRS released proposed regulations clarifying the definition of &ldquo;substantial risk of forfeiture&rdquo;<a href="#_ftn6" name="_ftnref6">⁶</a> under Section&nbsp;83, integrating more closely with the Section&nbsp;409A definition of &ldquo;substantial risk of forfeiture&rdquo; and incorporating its ruling in Revenue Ruling 2005-48 (for details on the changes <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3622">3622</a> and especially Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3538">3538</a>). On February&nbsp;25, 2014, the IRS released final regulations that are substantially similar to the proposed regulations. These regulations will apply to all transfers of property on or after January&nbsp;1, 2013, though the final regulations may be relied on as to transfers after May&nbsp;30, 2012.<a href="#_ftn7" name="_ftnref7">⁷</a><br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(b).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp;&nbsp; Rev. Rul. 2007-49, 2007-31 IRB 237.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(h).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp;&nbsp; Rev. Rul. 79-305, 1979-2 CB 350.<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp;&nbsp; As noted several places in &lt;strong&gt;<em>Tax Facts</em>&lt;/strong&gt;, there are currently seven definitions of &ldquo;substantial risk of forfeiture&rdquo; in the IRC (including the definition of &ldquo;substantial limitation,&rdquo; which historically has been referred to by attorneys and judges as a &ldquo;substantial risk of forfeiture&rdquo;). These seven definitions are usually similar but also not exactly the same (e.g., the Section&nbsp;457(f) definition for ineligible nonqualified deferred compensation plans versus the definition for purposes of Section&nbsp;409A). They frequently are additive to each other, which is helpful if a planner is aware there are more than one that is applicable. These multiple definitions create considerable confusion for all parties concerned trying to properly construct and administer compensation plans of all types. <em><em>See</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3538">3538</a> for a listing of the seven.<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp;&nbsp; Prop. Treas. Reg. &sect;&nbsp;1.83-3.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> A restricted stock award, which is considered a funded Section&nbsp;83 &ldquo;transfer of property&rdquo; for income tax purposes, is an outright grant of shares by a company to an individual, usually an employee, without any payment by the recipient (or for only a nominal payment). The shares of stock generally are subject to a contractual provision under which the granting company has the right (but not the obligation) to repurchase or reacquire the shares from the recipient on the occurrence of a specified event (e.g., termination of employment). This right of repurchase or reacquisition expires after a specified period of time, either all at once or in increments (for example, a grant of 1,000 shares with 200 shares vesting annually over a five year period). The expiration of this right is referred to as &ldquo;vesting.&rdquo; During the period that the shares of stock may be repurchased or reacquired, the recipient is prohibited from selling (or otherwise transferring) the shares. This is why the shares are called &ldquo;restricted stock.&rdquo; The passage of time typically serves as the primary restriction for such stock and is the normal substantial risk of forfeiture in the grant necessary to prevent current taxation under IRC Section&nbsp;83 and also to claim the &ldquo;short term deferral exception&rdquo; to avoid Section&nbsp;409A coverage. Restricted stock vesting may depend on restrictions other than time (e.g., satisfying corporate performance goals, such as reaching a specified level of profitability) that also might satisfy these requirements.<br /> <br /> On May&nbsp;29, 2012, the IRS released proposed regulations clarifying the definition of &ldquo;substantial risk of forfeiture&rdquo; under Section&nbsp;83, and incorporating its ruling in Revenue Ruling 2005-48 (for details on the changes <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3538">3538</a>). On February&nbsp;25, 2014, the IRS released final regulations that are substantially similar to the proposed regulations. These regulations apply to all transfers of property on or after January&nbsp;1, 2013, though the final regulations may be relied on as to transfers after May&nbsp;30, 2012.<a href="#_ftn1" name="_ftnref1">¹</a> Hence, they apply to restricted stock plans that usually achieve income deferral because they require substantial future service, which provides an adequate Section&nbsp;83 &ldquo;substantial risk of forfeiture.&rdquo;<br /> <br /> For the tax treatment of restricted stock, including the taxability of dividends on restricted stock, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3623">3623</a>.<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp; Prop. Treas. Reg. &sect;&nbsp;1.83-3, Treas. Reg. &sect;&nbsp;1.83-3.<br /> <br /> </div></div><br />

<div class="Section1">Dividends received on restricted stock are extra compensation to an employee that must be included on the employee's Form W-2. Dividends received on restricted stock that the employee chooses to include in his or her income in the year transferred are treated the same as any other dividends. The employee should receive a Form 1099-DIV showing these dividends. These dividends should not be included in the employee's wages on the income tax return; instead, the employee should report them as dividends.</div>

<div class="Section1">The employer has no obligation to pay FICA or FUTA taxes, or to withhold federal income taxes, when an option is granted. Pending further guidance from the IRS, employers also are not obligated to pay or withhold FICA and FUTA taxes on the exercise of ISOs.<a href="#_ftn1" name="_ftnref1">¹</a> However, the IRS has announced that any sponsor determination to impose FICA or FUTA on the exercise of ISOs will not take effect before January 1 following the second anniversary of the announcement.</div><br /> <div class="Section1"><br /> <br /> IRC Section 6039 requires employers to provide a written statement to each employee regarding any exercise of an ISO and, beginning for transfers occurring in 2009 or later, to file a similar information return with the IRS by January 31 of the year following the transfer.<a href="#_ftn2" name="_ftnref2">²</a> Under proposed regulations, the information return must identify the parties and provide the following information:<br /> <blockquote>The date the option was granted<br /> <br /> The exercise price per share<br /> <br /> The date the option was exercised<br /> <br /> The fair market value of a share on the date of exercise<br /> <br /> The number of shares transferred pursuant to the exercise</blockquote><br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.   Notice 2002-47, 2002-28 IRB 97.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.   Prop. Treas. Reg. §§ 1.6039-1, 1.6039-2.<br /> <br /> </div>

<div class="Section1">NQSOs that are exercisable at less than their fair market value at the date of grant,<a href="#_ftn1" name="_ftnref1">¹</a> or where there are additional deferral features in the NQSO, will be subject to the rules governing deferred compensation plans under IRC Section&nbsp;409A ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3541">3541</a>). Where the exercise price can never be less than the fair market value of the underlying stock at the date of grant, and where there is no other feature for the deferral of compensation, a stock option will not constitute deferred compensation subject to IRC Section&nbsp;409A, which is the desired design objective.<a href="#_ftn2" name="_ftnref2">²</a> Plans generally could substitute non-discounted stock options and stock appreciation rights for discounted options and rights until December&nbsp;31, 2007.<a href="#_ftn3" name="_ftnref3">³</a><div class="Section1"><br /> <br /> Under a pre-409A ruling, stock options could be &ldquo;converted&rdquo; to a deferred compensation plan free of tax under limited circumstances. Where employees could choose to retain or surrender both ISOs and NQSOs in exchange for an initial deferral amount under a nonqualified deferred compensation plan, the IRS indicated that neither the opportunity to surrender the options, nor their actual surrender, would create taxable income for participants under either the constructive receipt or economic benefit doctrines.<a href="#_ftn4" name="_ftnref4">⁴</a> For a discussion of the theories of constructive receipt and economic benefit, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3542">3542</a>.<br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp; <em>See Sutardja v. U.S.</em>, No.&nbsp;11-724T (Ct. Cl. Feb.&nbsp;27, 2013). To emphasize the IRS&rsquo;s hard position on the FMV requirement, <em>Sutardja</em> involved a transition case of a grant made before enactment of Section&nbsp;409A but the IRS successfully applied IRS Notice 2005-1, which was the first guidance on new Section&nbsp;409A.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp; Treas. Reg. &sect;&nbsp;1.409A-1(b)(5). <em>Also see</em> CCM 132502-09 (Jun.&nbsp;6, 2009), released July&nbsp;17, 2009 for additional guidance on proper NQSOs release steps for both IRC Sections 162(m) and 409A.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp;&nbsp; Notice 2006-79, 2006-43 IRB 763.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp;&nbsp; Let. Rul. 199901006.<br /> <br /> </div></div><br />

<div class="Section1">An employer granting an ISO is not entitled to an income tax deduction with respect to the option on its grant or its exercise.<a href="#_ftn1" name="_ftnref1">¹</a> The amount received by the employer as the exercise price will be considered the amount received by the employer for the transfer of the ISO stock.<a href="#_ftn2" name="_ftnref2">²</a> If the employee disposes of the stock prior to the end of the requisite holding period, the employer generally may take a deduction for the amount that the employee recognized as ordinary income in the same year in which the employee recognizes the income.<a href="#_ftn3" name="_ftnref3">³</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.   IRC § 421(a)(2).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.   IRC § 421(a)(3).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.   IRC § 421(b).<br /> <br /> </div>

<div class="Section1">An employer has no obligation to pay employment taxes or to withhold federal income taxes upon the grant of NQSOs, unless the plan fails to place itself in the desired exception to Section&nbsp;409A. In that case, Section&nbsp;409A taxation, reporting, and withholding would be required. Under Section&nbsp;83 (assuming exception from Section&nbsp;409A coverage), on exercise, the employer must treat the excess of the market value of shares received over the grant price as wages subject to FICA, FUTA, and federal income tax withholding in the pay period in which the income arises. The employer has no obligation to withhold or pay federal income or employment taxes on the sale of shares purchased by option.<div class="Section1"><br /> <br /> Employers are to use code &ldquo;V&rdquo; in Box 12 on Form W-2 to identify the amount of compensation to be included in an employee&rsquo;s wages in connection with the exercise of an employer-provided NQSO. Completion of code V is addressed in the instructions for Forms W-2 and W-3. Employers must report the excess of the fair market value of the stock received on exercise of the option over the amount paid for that stock on Form W-2 in boxes 1, 3 (up to the Social Security wage base), 5, and 12 (using code V) when an employee (or former employee) exercises his or her options.<a href="#_ftn1" name="_ftnref1">¹</a> If an employer were to fail to claim the exception to 409A and violate Section&nbsp;409A, it would follow reporting and withholding required for Section&nbsp;409A plans ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3541">3541</a>).<br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp; Ann. 2000-97, 2000-48 IRB 557; Ann. 2001-7, 2001-3 IRB 357.<br /> <br /> </div></div><br />

<div class="Section1">A Nonqualified Stock Option (&ldquo;NQSO&rdquo;) is generally an option to purchase employer stock that does not satisfy the legal requirements of an ISO ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3611">3611</a>).<div class="Section1"><br /> <p style="text-align: center;"><strong>Tax Implications for Employees</strong></p><br /> The tax implications of an NQSO are governed by IRC Section&nbsp;83, and potentially by Section&nbsp;409A, because they give a participant a legally binding right to compensation that will be realized in a later taxable year. Final regulations to Section&nbsp;409A allow an NQSO to be structured to claim the equity plan exception and avoid Section&nbsp;409A coverage. The requirements to claim the regulatory exception from Section&nbsp;409A coverage are:<br /> <blockquote>the option stock must be Section&nbsp;409A &ldquo;service recipient stock;&rdquo;<br /> <br /> the exercise price must be at fair market value on the option grant date;<br /> <br /> the option share total must be fixed on the grant date;<br /> <br /> the option stock must be subject to taxation under Section&nbsp;83 and Treasury Regulation Section&nbsp;1.83-7; and<br /> <br /> the option cannot provide for any additional deferral of compensation features.</blockquote><br /> If an option does not meet these preconditions, and is issued below fair market value, it must comply with Section&nbsp;409A, which usually destroys the intended objective and subjects the award to immediate 409A taxation with penalties. Fortunately, the IRS has provided for a correction method for such failures that allows the participants to avoid experiencing the 409A taxation scenario if the error is discovered early and corrected quickly ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3541">3541</a>).<br /> <br /> Under Section&nbsp;83, an employee generally is not taxed on an NQSO at grant unless it has a readily ascertainable fair market value and is not subject to a substantial risk of forfeiture.<a href="#_ftn1" name="_ftnref1">¹</a> Options generally do not have a readily ascertainable fair market value unless they are publicly traded.<a href="#_ftn2" name="_ftnref2">²</a> If an NQSO does not have a readily ascertainable fair market value at grant, it is taxed at the time of exercise.<a href="#_ftn3" name="_ftnref3">³</a> If an NQSO with a readily ascertainable fair market value is subject to a Section&nbsp;83 substantial risk of forfeiture, it is taxed when the risk of forfeiture lapses. When taxed, the employee will recognize the excess of the market value of shares receivable over the grant price as ordinary income subject to FICA, FUTA, and federal income tax.<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <br /> On May&nbsp;29, 2012, the IRS released proposed regulations clarifying the key definition of &ldquo;substantial risk of forfeiture&rdquo; for purposes of Section&nbsp;83. On February&nbsp;25, 2014, the IRS released final regulations that are substantially similar to the proposed regulations. (For details, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3538">3538</a>.)<a href="#_ftn5" name="_ftnref5">⁵</a> These clarifications incorporate the IRS&rsquo; position in Revenue Ruling 2005-48, in which it rejected the extension of the court&rsquo;s logic in the case of <em>Robinson v. Comm.</em> that implied that restrictions other than those related to the purpose of the transfer, such as lock-up agreement restrictions and Rule&nbsp;10b-5 trading restrictions mandated by U.S. securities law, could result in the deferral of taxation. It also ruled that Section&nbsp;16(b) of the Securities Exchange Act of 1934 is the ONLY securities law provision that will defer taxation under Section&nbsp;83. The regulations apply to property transferred on or after January&nbsp;1, 2013. The proposed regulations can be relied upon for transfers after May&nbsp;30, 2012.<br /> <br /> <hr><br /> <br /> <strong>Planning Point:</strong> These regulations would seem to clarify that federally mandated clawback requirements as in Dodd-Frank, TARP, and Sarbanes-Oxley will NOT defer taxation on stock options post exercise, or restricted stock awards post vesting, even if the stock is potentially subject to forfeiture or disgorgement upon triggering of such a clawback. They might even limit use of noncompete agreements and consulting agreements to defer taxation, given that the IRS has drawn language from Section&nbsp;409A, and Section&nbsp;409A specifically provides that noncompete and consulting agreements will not constitute a substantial risk of forfeiture, although this is less clear at the date of publication (note that the proposed Section&nbsp;409A/457 integration regulations may change this result, as well). Time will tell if these regulations are only &ldquo;clarifications&rdquo; or substantive changes, so planners must follow the progress of the IRS&rsquo; administration of these regulations, now that they are finally effective.<br /> <br /> <hr><br /> <br /> Within 30 days of the grant of an NQSO subject to a Section&nbsp;83 substantial risk of forfeiture, an employee may elect under IRC Section&nbsp;83(b) to be taxed currently on the fair market value of the option. Any appreciation after the election is taxable as a capital gain. If the NQSO is ultimately forfeited, no deduction is allowed for that forfeiture.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <br /> It is possible to escape state income taxation on certain nonqualified deferred compensation benefits by establishing new residence in a different state that does not impose income tax (e.g., Nevada) before distribution of the benefit begins However, the Supreme Court of Connecticut has held in a Connecticut case<a href="#_ftn7" name="_ftnref7">⁷</a> involving NQSOs that a former taxpayer cannot escape Connecticut state income taxation on options that are already issued only for services performed while in Connecticut. The Connecticut Supreme Court reached this conclusion even though the nonqualified options were exercised at the time. The taxpayer was a resident of another state. The SCOTUS denied review on appeal so the Connecticut holding imposing taxation on the vested NQSOs was allowed to stand despite the taxpayer&rsquo;s argument that the Connecticut ruling was at variance with a number of the other federal appellate circuits.<a href="#_ftn8" name="_ftnref8">⁸</a><br /> <p style="text-align: center;"><strong>Tax Implications for Employers</strong></p><br /> An employer has a corresponding deduction (in the same amount and at the same time) as the ordinary income recognized by the employee.<a href="#_ftn9" name="_ftnref9">⁹</a> Compensation paid in the form of stock options normally triggers the receipt of wages for the purpose of employment tax and withholding provisions in the amount of the income generated under IRC Section&nbsp;83(a).<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp;&nbsp; IRC &sect;&sect;&nbsp;83(a), 83(e)(3).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp;&nbsp; Treas. Reg. &sect;&nbsp;1.83-7(b)(1).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp;&nbsp; Treas. Reg. &sect;&nbsp;1.83-7(a).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(a).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp;&nbsp; Prop. Treas. Reg, &sect;&nbsp;1.83-3, Treas. Reg. &sect;&nbsp;1.83-3.<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(b)(1).<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp;&nbsp; <em>Allen v. Comm. of Rev. Services</em>, 324 Conn. 292, 152 A.3d. 488 (Sup. Ct. 2016).<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp;&nbsp; <em>Cert. den.</em>, 423 U.S. 845 (2017).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp;&nbsp; IRC &sect;&nbsp;83(h).<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp;&nbsp; See Rev. Rul. 79-305, 1979-2 CB 550; Rev. Rul. 78-185, 1978-1 CB 304.<br /> <br /> </div></div><br />