Do companies receive a tax deduction for stock grants?
September 21, 2011
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