Do companies receive a tax deduction for stock grants?

September 21, 2011

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


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?



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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