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Final Regulations and Recent Tax Court Case Clarify Definition of “Substantial Risk of Forfeiture” Under IRC Section 83

The IRS recently issued final Treasury regulations clarifying the definition of “substantial risk of forfeiture” under Code Section 83 which determines when employees will be subject to federal income tax on property (such as insurance policies or shares of stock) transferred to them by their employer in exchange for their services. Since income taxation generally is deferred as long as the transferred property is subject to a substantial risk of forfeiture, the definition of this term is very important.

This article discusses the clarifications that the recently issued final Treasury regulations make to the definition of substantial risk of forfeiture.