Rev. Proc. 81-1

Section 1. Background

Rev. Proc. 80-22, 1980-1 C.B. 654, sets forth areas in which advance rulings or determination letters will not be issued by the Internal Revenue Service. Section 3.012 of Rev. Proc. 80-22 states that rulings or determination letters will not be issued regarding property transferred pursuant to section 83 of the Internal Revenue Code when the specific question or problem is whether a restriction constitutes a substantial risk of forfeiture if the employee is a controlling shareholder.

Section 1.83-3(a)(2) of the Income Tax Regulations provides that the grant of an option to purchase certain property does not constitute a transfer of such property. If the amount paid for the transfer of property is an indebtedness secured by the transferred property, on which there is no personal liability to pay all or a substantial part of such indebtedness, such transaction may be in substance the same as the grant of an option rather than a transfer. The determination of the substance of the transaction shall be based upon all the facts and circumstances.

Sec. 2. Procedure

Section 3.012 is hereby amplified to read as follows:

2 Section 83--Property Transferred in Connection with Performance of Services.--Whether a restriction constitutes a substantial risk of forfeiture if the employee is a controlling shareholder. Also, whether a transfer has occurred if the amount paid for a purported transfer of property involves a nonrecourse obligation.

Sec. 3. Effective Date

This revenue procedure will apply to all ruling requests on hand in the National Office on January 19, 1980, the date of publication of this revenue procedure in the Internal Revenue Bulletin, as well as to requests received thereafter.

Sec. 4. Effect on Other Revenue Procedures

Rev. Proc. 80-22 is amplified.