Restricted Stock: Section 83(b)

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Decisions At Grant With Restricted Stock (Part 2): The 83(b) Election Risks

Tom Davison
Part 1 examined the basic facts of restricted stock and the decisions you need to make at grant. Part 2 explains the risks of the 83(b) election, which lets you choose to be taxed at grant rather than vesting.

Decisions At Grant With Restricted Stock (Part 3): Analyze Your Alternatives

Tom Davison
Now that you understand the risks of choosing to be taxed at grant with a Section 83(b) election, should you do it? Part 3 takes you through the analysis.

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FAQs (Jump to articles)

How do I make a timely and complete Section 83(b) election?

Named for the Internal Revenue Code section that authorizes it, this election is made only (1) when you want to be taxed on the value of restricted stock at grant rather than vesting or (2) when you exercise options that are...

Is a Section 83(b) election taxing you on the value of restricted stock at grant ever revocable? Can it be rescinded?

The IRS has provided guidance on the limited circumstances in which this is permitted. The Section 83(b) election is irrevocable unless you show...

My restricted stock never vested because I left my company, but I paid taxes on the stock at the time of grant. Can I recover the taxes that I paid with the 83(b) election or claim some other deduction?

When you forfeit the stock, you are allowed a limited capital loss deduction for any amount you paid...

Can I make a Section 83(b) election for just part of my restricted stock grant?

Yes, according to most experts. There is nothing in Section 83 of the Internal Revenue Code that states or implies that a grant of restricted stock is a single piece of property...

Can I make a Section 83(b) election for a grant of restricted stock units (RSUs)?

Restricted stock and RSUs are governed by separate sections of the US tax code. Most experts say that you...

Can my company file my Section 83(b) election for me?

Yes. The IRS has allowed employers to file Section 83(b) elections for employees...

How do I e-file the paper version of my 83(b) election with my online tax return?

The Section 83(b) election must be filed...

Can my company prohibit me from making a Section 83(b) election on my restricted stock grant?

Your company can make it a condition of accepting the grant that you agree not to make this election. It may do this because it feels...

If I make a Section 83(b) election to be taxed on the value of my restricted stock at grant, can I sell shares or have my company withhold shares to pay the taxes?

Because no shares have vested, you cannot sell shares yet, and thus your company cannot...

By the time my restricted stock vested the price had dropped from the market price at grant. But I elected to pay taxes on the stock value at the time of grant. Can I recover the taxes that I paid with the Section 83(b) election?

No. You were optimistic that the stock price would rise. This is the risk...

NEW! I have founder's stock that has become subject to forfeiture and transfer restrictions required by new investors. Does my stock become taxable to me, or do I need to make a Section 83(b) election?

The imposition of forfeiture, transfer, and buyback restrictions on you when a new investor acquires stock...

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