Archive - May 2012
Proposed Section 83 Regulations Adopt the Lock-up Agreement Reasoning of Rev. Rul. 2005-48 May 31, 2012
Several days ago Treasury issued Prop. Reg. §§1.83-3(c) and (j) (REG-141075-09). In these proposed regulations the IRS adopted the reasoning of Rev. Rul. 2005-48 as to the interplay between lock-up agreements and Section 83 of the Code. The ruling and the proposed regulations basically stand for the proposition that a lock-up agreement alone does not cause the compensatory shares to be substantially nonvested, and thus, it does not prevent the taxation of the shares under Section 83 at the time of receipt. These principles are illustrated by Ex. 6 of Prop. Reg. § 1.83-3(j).How can these...