IRS PLR: Employee Stock Transferability Restrictions in Tax Deferral Election Won’t Prevent Satisfaction of Qualified Stock Limitation (IRC §83)

A corporation’s (“Taxpayer”) stock option plan transferability restrictions and repurchase right within employees’ election to defer income tax on realized gain (tax code Section 83(i)(1)(A)) won’t prevent the shares from satisfying the limitation applicable to qualified stock (Section 83(i)(2)(B)), the IRS ruled. As a result of the transferability restrictions, the IRS ruled, the applicable stock is not transferable (within the meaning of Section 83(i)(1)(B)(i)) until the earliest of (i) five years from the exercise date of the option, (ii) the first date that any of Taxpayer’s stock becomes readily traded on an established ...