Basic Restricted Profits Interest / 83(b) Question

[Alf]

We always understood that the actual grant of partnership profits interests were not immediately taxable, but now have documentation of a grantee making a Section 83(b) election at time of grant.

Are we missing something? If the grant is not taxable because fo the character of the property (partnership proftis interest), not the restriction, is it eligible for an 83(b) eleciton?

[E as in ERISA]

See proposed rules in Notice 2005-43

http://www.irs.gov/pub/irs-irbs/irb05-24.pdf

[mbozek]

Two obvious q:

1. Was the interest subject to the election an interest in the propertyy of the firm, e.g, profits or was it a cash payment. Cash is not considered property under IRC 83.

2. What benefit is gained by the election? Section 83 permits a person who has a forfeitable interest in property to elect to treat it as vested in the yr of the grant so as to convert the future increase in value to cap gain.