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Subject:   Employee stock grant
Date:   Thu, 16 Oct 2008
From:   Kyle

Mike,

I have a client who instead of giving a cash bonus to their employees wants to give them stock awards/grants. I believe the employees would have to report income equal to the value of the stock on the date of the grant, but would the company get a tax deduction equal to that amount?

Also, they want to issue the stock awards out of treasury stock. How would they account for the transactions?

Thanks,
Kyle

Answer

Date:   7 Nov 2008

Hello Kyle,

Yes, the employer gets a tax deduction corresponding to the income reported by the employees. See Internal Revenue Code Section 83 and the related regulations.

My newsletter and site relates to tax questions. I suggest that you refer to the accounting literature about your accounting question. The American Institute of Certified Public Accountants has a "hot line" for accounting issues, 877-242-7212.

Good luck!

Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.