Rev. Proc. 80-11

Section 1. Purpose

The purpose of this revenue procedure is to provide individual taxpayers guidance on reporting dividends on restricted stock that is not substantially vested within the meaning of section 83 of the Internal Revenue Code.

Sec. 2. Background

.01 Section 1.83-1 of the Income Tax Regulations provides that property transferred to an employee in connection with the performance of services is not taxable until it has become substantially vested in the employee. Until such property becomes substantially vested, the transferor shall be regarded as the owner of such property, and any income from such property received by the employee constitutes additional compensation and shall be included in the gross income of such employee for the taxable year in which such income is received. Section 3402 of the Internal Revenue Code (relating to income tax collected at source) requires employers to deduct and withhold from an employee a tax on the amount of such additional compensation. Under section 31.6051-1 of the Employment Tax Regulations employers required to deduct and withhold a tax under section 3402 are required to furnish the employee a Wage and Tax Statement, Form W-2, which is required to be attached to the employee's Federal income tax return, Form 1040.

.02 Section 6042 of the Code and the regulations thereunder require every person who makes payment of dividends of more than $10 in any calendar year to make an information return on a Statement for Recipients of Dividends and Distributions, Form 1099-DIV. The Service has become aware that in some cases paying agents have issued Forms 1099 for dividends paid on restricted stock.

Sec. 3. Procedure

The employee whose dividends are reflected on both a Form 1099-DIV and a Form W-2 may list the amount of the dividends reported on Form 1099-DIV on Schedule B of Form 1040, with a statement that the income has been reported as compensation in the appropriate place on Form 1040. The amount reported on the Form 1099-DIV should not be included in the total dividends shown on Schedule B or on page one of Form 1040.

Sec. 4. Effective Date

This revenue procedure is effective March 27, 1980, the date of its publication.