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Substantial Risk Of Forfeiture
A tax term that applies when rights to compensation are conditioned upon future services (e.g. working X years for a company) or certain targets (e.g. reaching a goal of performance or stock price). If the condition is not satisfied, the stock is forfeited.

In the context of restricted stock and early-exercise stock options, income is not recognized while the stock is subject to risk of forfeiture (e.g. vesting) unless a Section 83(b) election is filed with the IRS within 30 days of when a grant is received or an option is exercised.

For additional information, see a related FAQ.

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