What Is a Section 83(b) election?
A section 83(b) election is a tax election to include in your income the fair market value of property you have received in connection with the performance of services which you may not get to keep.
Generally, under the tax code, if you receive property in connection with the performance of services that you may not get to keep, and which you can’t transfer, you don’t have to take the fair market value of that property into income until it is determined that you will either (i) get to keep it, or (ii) the property becomes transferable.
Section 83(b) provides an opportunity for you to elect to be taxed at the time of the receipt of the property instead of waiting for the property to become transferable or no longer subject to a substantial risk of forfeiture.
Why Would You Want To Do This?
Why would you want to include in your taxable income the fair market value of property in excess of what you paid for it if you might not get to keep the property? There are a few different reasons:
- Because the fair market value of the property at the time of receipt might be nominal–meaning, the tax might be insignificant, and an election will avoid a potentially much higher tax bill later.
- Because the taxpayer might be paying the fair market value of the property so that electing to be taxed on its fair market value over what was paid for it means no tax is owed.
- Because the value of the property might increase substantially and when it vests the tax on the fair market value of the property at that time might be more than the taxpayer will be able to afford.
- Because the taxpayer might want his or her capital gains holding period start.
You do not have to file a Section 83(b) election in connection your receipt of shares if those shares are not subject to vesting. If your shares are fully vested, no Section 83(b) election is required of you.
What Is The Character Of The Income?
Under Section 83(a) of the Internal Revenue Code, a taxpayer who receives property in connection with the performance of services must generally recognize as ordinary income the difference between the value of the property and the amount paid in exchange therefor at the first time the property is either transferable or not subject to a substantial risk of forfeiture. Section 83(b) allows a taxpayer who receives property in connection with the performance of services that is subject to such restrictions (e.g., nonvested property) to elect to recognize this income at the time of transfer. The principal benefit of a Section 83(b) election is that the taxpayer can lock in appreciation which is generally taxable at capital gains rates upon later disposition.
You Can’t Make An 83(b) Election With Respect To A Stock Option
It is a common misconception, but a Section 83(b) election generally cannot be made with respect to the receipt of a private company stock option. You must exercise the option first and acquire the stock before you can make a Section 83(b) election, and you would only make a Section 83(b) election in that instance if you exercised the option and acquired unvested stock (if the stock acquired on exercise of the stock option was vested, there would be no reason to make a Section 83(b) election).
Another common misconception is that Section 83 does not apply to restricted stock that is purchased at fair market value. This is not true. Section 83 applies even to stock that has been purchased at fair market value, if the stock is subject to a substantial risk of forfeiture and received in connection with the performance of services. See this case, Alves v. Commissioner.
An 83(b) election has to be filed with the IRS within 30 days of receipt of the property, a copy has to be filed with the tax return of the person making the election, and a copy must be provided to the company.
Additional information about making 83(b) Election (also embedded below).
By Stephen Jacob August 5, 2011 - 2:32 pm
I have some fully vested ISO options that I’m planning to exercise. I find the information provided by the IRS to be rather impenetrable with respect to the 83(b) election form. I can’t figure out whether I need to file the form to document that I’ve purchased the stock and that it is *not* subject to forfeiture (since it’s fully vested) or whether I simply don’t need to file the form. Do you know if there is some specific section/document that might make this clear?
By Anonymous August 5, 2011 - 3:02 pm
If they are fully vesting options–and you should confirm then–then no 83(b) election is required, because you only make 83(b) elections with respect to stock you receive that is subject to service based vesting conditions. But–have a lawyer or tax advisor review the docs for you, and confirm with your company’s CFO or whoever administers the plan that you are fully vested with respect to these shares.
By Stephen Jacob August 5, 2011 - 3:06 pm
Thanks, Joe! Actually, the reason I’m exercising these options now is that they’re about to expire (nobody talks about the 10 year expiration on ISO options because nobody works at a start-up for over 10 years, right? Apparently not nobody, but not many of us). All of the options I will be purchasing finished their vesting schedule back in 2005. 🙂
By Anonymous August 5, 2011 - 3:08 pm
Yeah, it is funny how that 10 year term seems like forever when you put it down in paper for a startup–it seems like forever! Good luck!
By Anonymous May 3, 2018 - 4:04 pm
83b is only for unvested shares.
By What Is A Section 83(b) Election? - Startup Law Blog by Joe Wallin July 23, 2012 - 5:33 pm
[…] { float:left; height: 30px; margin:4px 4px 4px 4px; } // At its most basic level, a Section 83(b) election is an election to be taxed on property received in connection with the performance of services even […]
By markgavagan October 17, 2012 - 6:39 am
Do I have this right? If I own 100% of the stock outright in a private startup corporation (i.e., the beginning value is $0), there’s no need for an 83(b) election.
Thank you.
By joewallin October 17, 2012 - 6:43 am
If you are full vested, the shares not are subject to a risk under 83b, then no 83b election is required. But you should confirm your documents don’t subject your shares to a risk of forfeiture under 83b with your lawyer or whoever prepared the documents. This does not constitute legal advice. Happy to talk to you on the phone. 206 757 8184
By markgavagan October 17, 2012 - 7:13 am
Thank you! I appreciate your response and all the good ideas on your blog. -Mark
By Matt November 21, 2012 - 3:53 pm
If an ISO results in no tax being paid on the spread between market value and exercise price at the time of exercise, then why would you also file an 83b? It seems as if an 83b accomplishes that as well. Thank you.
By joewallin November 21, 2012 - 4:02 pm
Not sure I am following your question. Generally, immediately exercisable ISOs are not advisable. So, generally speaking, you would not be exercising an ISO except for vested portions–and no 83b is required for vested portions of an exercised option.
By Keith March 13, 2013 - 1:26 pm
I received a grant of 4,000 shares common stock plus additional 6,000 restricted shares that vest over the next 1.5 years. So, do I need to file an 83b only on the restricted shares? I expect to leave the company before the 6K shares vest, so then it appears I don’t need to file the 83b? Also, how do I establish fair market value? It’s a small company and mgt. says they can’t give me guidance on the value, so can I use $0.10/share?
By Joe Wallin March 13, 2013 - 2:05 pm
How long ago did you receive the shares?
By Seamus March 20, 2013 - 10:34 pm
I received stock options from my employer upon acceptance of the job. I received X amount of shares, 4 year vesting period. 25% vests after 1 year with the company, the remaining 75% distributed monthly for the following three years. My employment started April 2nd, 2012. In September, we were acquired for an extremely favorable amount by another private company. They purchased our shares out right, no conversions, with all vested stocks paid just weeks after the acquisition. My employer provided an 83b form and advised signing it, so I did and promptly submitted. I have no vested stock until April 2nd, 2013. I am wondering how signing the 83b will effect me. I am also wondering if my gain is recognized in my W2 already. Thanks!
By adam w March 21, 2013 - 4:45 pm
So you say NOT to file an 83b if you exercise only vested options from a private company. If that’s the case, then what DO I need to do come time to file my return?
By Joe Wallin March 21, 2013 - 5:57 pm
If these are ISOs, you will want to know the spread on exercise so you can calculate your AMT.
By StephenJacob March 21, 2013 - 10:11 pm
I did precisely this in 2011. I exercised options (ISOs) in my (still privately held) company. I paid $0.01/share. The valuation (“409A valuation”, I believe) of the stock when I exercised was $0.05/share. So I made a gain of $0.04/share for AMT purposes.
Since all of the options I exercised were fully vested, an 83(b) was not required (actually, see below where I asked about this). Indeed, it wouldn’t even make sense.
The point of an 83(b) election is to recognize your AMT gain at time of exercise instead of the default (if you do not file an 83(b) election) of as the shares vest. In *theory* I suppose you might want to opt _not_ to make an 83(b) election if you did not want to have a large AMT gain this year … but you risk a larger overall AMT gain (later) if the valuation of the shares is higher when they later vest. *If* your options are already fully vested, there would be no difference between the default (time of exercise) and an 83(b) election (time of exercise).
Either way, though, your gain on shares you have exercised but have not sold (or is that “cannot yet sell”?) is an AMT gain only, not a regular capital gain.
By google July 8, 2013 - 10:49 pm
google…
G http://images.google.com.hk/…
By uFRcQCPF July 8, 2013 - 10:51 pm
uFRcQCPF…
–…
By Qhdpdsyt July 8, 2013 - 10:54 pm
Qhdpdsyt…
–…
By scjtgSHy July 8, 2013 - 10:56 pm
scjtgSHy…
–…
By Cheap Oakley Sunglasses July 8, 2013 - 10:57 pm
Cheap Oakley Sunglasses…
–…
By firefall gold July 8, 2013 - 10:58 pm
firefall gold…
–…
By isbale marant sneaker July 8, 2013 - 10:58 pm
isbale marant sneaker…
–…
By jimmy choo outlet July 8, 2013 - 10:58 pm
jimmy choo outlet…
–…
By Chanel Bags Outlet July 8, 2013 - 10:59 pm
Chanel Bags Outlet…
–…
By Gucci Handbags Sale July 8, 2013 - 10:59 pm
Gucci Handbags Sale…
–…
By herve leger dress replica July 8, 2013 - 10:59 pm
herve leger dress replica…
–…
By chanel outlet July 8, 2013 - 11:00 pm
chanel outlet…
–…
By Fake Oakley July 8, 2013 - 11:00 pm
Fake Oakley…
–…
By prada outlet July 8, 2013 - 11:00 pm
prada outlet…
–…
By nike air max 2013 mens July 8, 2013 - 11:01 pm
nike air max 2013 mens…
–…
By CHRISTIAN LOUBOUTIN OUTLET July 8, 2013 - 11:01 pm
CHRISTIAN LOUBOUTIN OUTLET…
–…
By RALPH LAUREN OUTLET July 8, 2013 - 11:01 pm
RALPH LAUREN OUTLET…
–…
By Polo Ralph Lauren Outlet July 8, 2013 - 11:02 pm
Polo Ralph Lauren Outlet…
–…
By Hollister Outlet July 8, 2013 - 11:02 pm
Hollister Outlet…
–…
By BIRKIN DE HERMES July 8, 2013 - 11:02 pm
BIRKIN DE HERMES…
–…
By Fake Oakley Sunglasses July 8, 2013 - 11:03 pm
Fake Oakley Sunglasses…
–…
By vibram barefoot shoes July 8, 2013 - 11:03 pm
vibram barefoot shoes…
–…
By IUOXwklu July 8, 2013 - 11:03 pm
IUOXwklu…
83(b) Election | Startup Law Blog…
By marc jacobs outlet July 8, 2013 - 11:05 pm
marc jacobs outlet…
–…
By CELINE OUTLET July 8, 2013 - 11:06 pm
CELINE OUTLET…
–…
By Hermes Outlet July 8, 2013 - 11:06 pm
Hermes Outlet…
–…
By CHEAP PRADA HANDBAGS July 8, 2013 - 11:08 pm
CHEAP PRADA HANDBAGS…
–…
By Louis Vuitton Outlet July 8, 2013 - 11:08 pm
Louis Vuitton Outlet…
–…
By GenLLWGo July 10, 2013 - 10:26 am
GenLLWGo…
–…
By GUCCI HANDBAGS July 10, 2013 - 10:32 am
GUCCI HANDBAGS…
–…
By CHEAP MAC MAKEUP July 10, 2013 - 10:33 am
CHEAP MAC MAKEUP…
–…
By Cheap Louis Vuitton Handbags July 10, 2013 - 10:33 am
Cheap Louis Vuitton Handbags…
–…
By CHEAP LOUIS VUITTON BAGS July 10, 2013 - 10:34 am
CHEAP LOUIS VUITTON BAGS…
–…
By gucci outlet July 10, 2013 - 10:34 am
gucci outlet…
–…
By gucci outlet online July 10, 2013 - 10:34 am
gucci outlet online…
–…
By Prada July 10, 2013 - 10:34 am
Prada…
–…
By MULBERRY BAGS July 10, 2013 - 10:35 am
MULBERRY BAGS…
–…
By seo tools July 10, 2013 - 10:35 am
seo tools…
–…
By Louis Vuitton Soldes July 10, 2013 - 10:36 am
Louis Vuitton Soldes…
–…
By GSCRAPER July 10, 2013 - 10:36 am
GSCRAPER…
–…
By cheap iphone 5 unlocked July 10, 2013 - 10:37 am
cheap iphone 5 unlocked…
–…
By lancel July 10, 2013 - 10:37 am
lancel…
–…
By Scrapebox July 10, 2013 - 10:38 am
Scrapebox…
–…
By chanel outlet store July 10, 2013 - 10:39 am
chanel outlet store…
–…
By Chanel Sale July 10, 2013 - 10:39 am
Chanel Sale…
–…
By gucci outlet store July 10, 2013 - 10:40 am
gucci outlet store…
–…
By LOUIS VUITTON BAGS July 10, 2013 - 10:40 am
LOUIS VUITTON BAGS…
–…
By prada outlet online July 10, 2013 - 10:40 am
prada outlet online…
–…
By celine handbags July 10, 2013 - 10:41 am
celine handbags…
–…
By GUCCI BAGS July 10, 2013 - 10:41 am
GUCCI BAGS…
–…
By Chanel Bags Cheap July 10, 2013 - 12:26 pm
Chanel Bags Cheap…
83(b) Election | Startup Law Blog…
By louis vuitton uk July 10, 2013 - 12:27 pm
louis vuitton uk…
83(b) Election | Startup Law Blog…
By Samsung Galaxy S3 July 10, 2013 - 12:28 pm
Samsung Galaxy S3…
83(b) Election | Startup Law Blog…
By Scrapebox July 10, 2013 - 12:28 pm
Scrapebox…
83(b) Election | Startup Law Blog…
By chi flat iron July 10, 2013 - 12:29 pm
chi flat iron…
83(b) Election | Startup Law Blog…
By Mulberry Outlet July 10, 2013 - 12:30 pm
Mulberry Outlet…
83(b) Election | Startup Law Blog…
By sac Vanessa Bruno pas cher July 10, 2013 - 12:30 pm
sac Vanessa Bruno pas cher…
83(b) Election | Startup Law Blog…
By lululemon sale July 10, 2013 - 12:31 pm
lululemon sale…
83(b) Election | Startup Law Blog…
By marc jacobs outlet July 10, 2013 - 12:33 pm
marc jacobs outlet…
83(b) Election | Startup Law Blog…
By CHANEL HANDBAGS July 10, 2013 - 12:33 pm
CHANEL HANDBAGS…
83(b) Election | Startup Law Blog…
By Seo July 10, 2013 - 12:34 pm
Seo…
83(b) Election | Startup Law Blog…
By celine outlet July 10, 2013 - 12:35 pm
celine outlet…
83(b) Election | Startup Law Blog…
By Prada Shoes July 10, 2013 - 12:36 pm
Prada Shoes…
83(b) Election | Startup Law Blog…
By GUCCI OUTLET July 10, 2013 - 12:37 pm
GUCCI OUTLET…
83(b) Election | Startup Law Blog…
By Elliot December 12, 2013 - 2:57 pm
I received a grant of stock earlier this year valued at $20k, and filed an 83(b). I left the company a month ago (same calendar year), and 75% of the stock grant will now be forfeited back to the company. I know that in general I need to pay tax on the full $20k worth of stock even though I’m only keeping $5k worth. Is there any exception if I notify the IRS that the stock is being taken back within the same calendar year that it was granted?
By Joe Wallin December 12, 2013 - 4:52 pm
Elliot, I don’t know if there is but given the end of year is closing I would encourage you to meet with tax counsel right away.
By rs January 13, 2014 - 8:20 pm
Joe, I had a big firm help me issue stock when we got our first big ($1.5M) investor–I vested several advisors with stock for their services and promised to issue shares later. A year and a half later I issued the stock at a nice valuation—but the letters I gave to the advisors on their “vested” % of the company were done at times of varying valuation ($2M to $4.5M and later more for investors). We are having a hard time getting a clear answer on tax treatment—and I feel I have been brutally failed by the large national law firm–we asked questions–got soft answers and went forward. I have one person who will look like they have $150K of shares in exchange for work for hire, and others with $40K of shares for services. Since they are not tradeable assets do we discount the tax liability if so where and when—do I issue 1099s to make this look like compensation given to advisors.
Do you have any advice?
RS
By Joe Wallin January 13, 2014 - 8:24 pm
I am happy to try to help. Want to call me at 206 757 8184?
By w January 14, 2014 - 5:52 am
My company just offered me 5000 shares of restricted stock with a fair market value of $0.90 (example values), vesting over time. In addition to the paperwork to sign for receiving the shares, they included a pre-filled 83(b) form that lists the fair market value as $0.00 (not an example value!) and the amount I paid for it at $0 (which is correct).
Is that okay for them to say that the fair market value is $0?
Extra info: We are a small startup, and I know the $0.90 value was used recently with regards to (successfully) obtaining new funding. That $0.90 value is not included anywhere in restricted stock agreement itself.
Thanks in advance
By Joe Wallin January 14, 2014 - 5:55 am
I don’t think you can list zero as the value. Happy to discuss on the phone. 206 757 8184.
By StephenJacob January 14, 2014 - 11:52 pm
Unlike Joe, I am not a lawyer, so take what I say with a pinch of salt, but … that sounds very fishy indeed to me.
Unless the company sold all its assets and then bet the resultant cash on red (and lost), I don’t think stock _can_ be valued at $0.00. As long as the company is worth _anything_, the stock must (consequently) be worth something.
A pre-filled 83(b) sounds odd, and I fear for other employees who may have believed it and purchased stock and filed taxes based on the assumption. :/
I will say, I don’t think the value of the stock has to match the price the most recent investor paid for it. If I understand correctly, they might have paid above the odds for preferred shares or for the right to buy in to a company which needed motivation to accept the funding. But if investors paid $0.90 I would guess your stock must have a value of at least a decent fraction of that.
It screams “AUDIT!” to me.
By Scott February 26, 2014 - 12:37 pm
My issue is that I have already (and mistakenly) filed an 83(b) election for vested shares. Is this something that I need to go through the IRS to revoke? Or since it was an unnecessary form, will it just be invalidated and not require any action from me?
By Joe Wallin February 26, 2014 - 12:57 pm
When you filed the form, did you indicate that the value of the shares you received was the same as the price you paid?
By Scott February 26, 2014 - 3:28 pm
Yes, I did.
By Joe Wallin February 26, 2014 - 4:08 pm
I think most tax accountants and lawyers would tell you it is a harmless error if there was no income to report, because you reported that the value you received was equal to what you paid for the property. Perhaps another member of the community here will chime in if they disagree. You could also post this question to Quora to see if anyone disagrees. Standard disclaimer–this doesn’t constitute legal or tax advice.
By Mayer June 1, 2014 - 2:19 pm
Great blog topic. I recently was hired by a startup that gave me 35,000 shares in lieu of cash for my consulting services. I paid nothing for the shares, and they are fully vested. The par value was listed as $0.0001. First, would I benefit from filing an 83b? Secondly, even though I paid nothing for those shares, does the IRS count them? How would I calculate the tax liability?
By Mayer June 1, 2014 - 2:21 pm
Sorry, on that second part I meant, “does the IRS see the granted shares as a tax liability?” Basically, do I have to pay taxes on shares I did not buy and have barely any value. : )
By Joe Wallin June 2, 2014 - 11:41 am
Do you want to call me at 206 757 8184 and we can go over?
Short story–if the shares are fully vested, there is no 83(b) election that has to be filed, because you are going to be taxed on their full value on receipt.
You should consult a lawyer or tax professional who can quickly review the documents with you, to confirm that they are in fact fully vested.
You are taxed on their value as if company paid you cash. If you are an independent contractor, it will appear on a Form 1099–or should.
By Thomas July 6, 2014 - 9:53 am
Joe — great blog. I recently was hired by a startup where I was granted equity that vests over a schedule (so it meets the service requirement). I would like to make a 83b election but I do not know the fair market value. Since is didn’t purchase the shares, I do not have any basis (I.e., did not pay $X per share for Y shares), instead the grant is for a percent of the company’s equity. The agreement stipulates that any vested stock can be re-purchased by the company if employment is terminated based on a valuation formula that works as a multiple of revenue (different multiple based on whether I or the firm terminates).
Question — how can I make an estimate of the current FMV of the grant that fits within IRS parameters? If I can get some existing revenue numbers from the company and apply the formula, is that adequate? Note that the revenue is very small, and given how much of a startup this is (a few guys), I might be able to make an argument that the value is near zero (there are no external investors that have invested and thus valued the firm at this point, no independent valuation has been made, etc).
Thanks
By Joe Wallin July 6, 2014 - 10:06 am
I would urge you to hire a tax advisor right away. So you don’t miss a deadline. If you call me at 206 757 8184 or email me at joewallin@dwt.com I can try to help you find someone.
By Lida September 15, 2014 - 5:27 pm
I read a lot of interesting posts here. Probably you spend
a lot of time writing, i know how to save you a lot of work, there is an online tool that
creates unique, google friendly articles in minutes, just type in google – laranitas free
content source
By hugh martin October 11, 2014 - 11:26 am
What is the 83b equivalent for foreign investors in USA company?
By Eric Kwok November 18, 2014 - 10:25 pm
hi Joe,
at the end of this blog, you mentioned “An 83(b) election has to be filed with the IRS within 30 days of receipt of the property, a copy has to be filed with the tax return of the person making the election, and a copy must be provided to the company.”. in 2013, my company is Pre-IPO and I early-exercise the ISO. 83(b) was filed within 30 days with receipt from IRS. I also gave a copy to my company. The only thing i forgot to do is to file a copy of 83(b) along with my 2013 tax return. Is it a problem? should I make it up by filing it with my 2014 tax return?
Thanks.
By Jodi November 24, 2014 - 12:07 pm
Can a S Corp company file an 83b election?
By Ryan March 10, 2015 - 10:56 am
Joe thanks for this column! I did some work with a startup in 2014 and for payment I was to receive RS. I filled out an agreement that included a pre-filled out 83b, provided by their lawyers, and was advised to complete it. The company never ended up issuing shares (not a well run company) and I have no proof of ownership at all, other than the agreement which is missing certificate numbers and transfer dates (almost like they intended to issue, but did not). Now tax time is here and I don’t know what to do. I filed the 83b properly, and the IRS acknowledged receipt, but I was never actually paid. It is also my understanding that upon making the 83b selection, this should have been processed through the company’s payroll dept. I have yet to receive a W-2 which leads me to believe this didn’t occur either. What should I do regarding taxes? Is the IRS going to expect a w-2 from them to be listed? I believe the company is no longer as it was a startup. Thanks for your assistance, I really appreciate it!
By Joe Wallin March 14, 2015 - 11:12 pm
Happy to discuss on the phone. 206 669 0997
By karin meyer August 27, 2015 - 11:39 am
Hopefully this thread hasn’t gone completely dead. I have conflicting advice on the need for an 83b filing for a multi-member LLC, with 50/50 ownership between its two members. In our Operating Agreement, we also state that a decreasing percentage of that ownership is subject to a Repurchase Option at Fair Market Price in the event that a member leaves or dies. This mimics the notion of vesting, but in fact, I believe we each own our shares outright since even in the event that we leave, we receive Fair Market Price. Is this consistent with your understanding? Thanks for all the great advice!!
By J B September 13, 2015 - 9:26 pm
Interesting question Karen – were you able to find a resolution?
By Michael December 7, 2015 - 11:30 pm
I filed an 83B within 30 days to the IRS, but I never got a response back. I sent it through certified mail, so I have a confirmation from the IRS department that they’ve received it, but I did not get a copy of my 83B back.
It is past the 30 days. What should I do now?
Thank you for your advice!
By S-corp Election | January 19, 2016 - 6:00 am
[…] 83(b) Election | Startup Law Blog – Section 83(b) election provides an opportunity for the taxpayer to elect to be taxed at the time of the receipt of the property. […]
By Raoul Duffy February 1, 2016 - 11:45 am
I incorporated my company back in May 2014. At that time my partner and I purchased shares from the company outright. Three months later, we decided to amend the original founder purchase agreement to introduce some vesting terms (vesting over 4 years, starting to vest immediately in July 2014). Because the shares were initially sold in May 2014 without any vesting at that time (and therefore, no risk of forfeiture), my lawyer told me in July 2014 that I didn’t need to file an 83(B) Election. My lawyer mentioned that the requirement to file an 83(B) Election only applies if the shares were initially issued subject to a right of forfeiture and in my case, the shares were issues in march and at that time, were not subject to forfeiture and therefore no form was required to be filed. Is this correct? Or was I supposed to file the 83(B) Form at the time of the stock purchase agreement amendment when we introduce some vesting terms? If my lawyer was wrong, is there a way to correct this mistake?
By Raoul Duffy February 1, 2016 - 12:41 pm
One clarification regarding the question above: In July when we introduced the vesting terms in the stock purchase amendment my partner and I technically kept ownership of the shares (since we had previously purchased them in May) but the vesting terms that we agreed upon were formulated such as in a case of a departure the company would have the right to repurchase the non-vested shares from the Partners.
By Anne Guo April 8, 2016 - 9:06 pm
Can you file the 83 b election only 1 time and only within 30 days of the stock grant? And is it within 30 days of start date or 30 days of the stock grant? If I want to execute early exercise on unvested stock options outside of the 30 days period, is there anything else I can do?
By Ben S April 30, 2016 - 6:41 am
I am a founder of a new company. My accountant has said we should file an 83(b) but the attorney for my company said we don’t need it because the founders shares we are getting are fully vested immediately with no restrictions. I don’t want to make a quick decision here as the costs to me down the road could be significant, but can you help me understand why there would ever be a case that we need an 83(b) election on shares that are fully vested at time of receipt?
By madden mobile coins May 6, 2016 - 7:05 pm
thank so considerablya lot for your website it helps a whole lot
By Josh Kanow May 11, 2016 - 9:53 am
When exactly do I need to file the 83.b election? I am submitting our articles of incorporation for Wyoming today and it states that our C-corp has the authority to issue 9,000,000 common and 900,000 preferred. Do we have thirty days to file now or is it when we give our founders their stock issuance forms?
By Joe Wallin May 30, 2016 - 1:12 pm
Runs from when you actually receive your shares. Not date of incorporation. But, hire a lawyer to help you!
By nancy wang May 21, 2016 - 7:00 pm
is 83(b) only for common stock? how about Series A preferred stock?
By CSGO June 1, 2016 - 7:10 am
Thanks with regard to furnishing such substantial subject matter
By W Startup June 10, 2016 - 12:56 am
Is it advisable for founders of a startup to always file a Section 83(b) election? Assuming all the shares are vested from day one. My assumption here is that by filing an 83(b) election, the tax basis of the shares will remain at the value specified on the date the election was made (which is based on the assumed valuation of the company at that start date). Also does this imply that the shares will then be taxed at the capital gains rate (instead of a personal income tax rate) if one of the founders decides to exit the business?
By Megan September 3, 2016 - 10:53 pm
Should I bother filing an 83b if I plan on leaving my company before I am fully vested? If I file, I have to pay taxes on $75000 of equity. I likely will leave when I am only 25% vested.
By KGallo September 9, 2016 - 1:17 pm
When does the 30 day period begin? When the options are granted per the agreement or when the options are actually exercised?
Thanks!
By James Yoon September 13, 2016 - 10:02 am
Has anyone used the website http://www.83bforms.com? It looks like it allows you to make the submission online, but I wanted to get an opinion from someone else first.
Has anyone used it?
By 83(b) Inquiry October 20, 2016 - 9:53 am
What should be filed on the 83(b) if the grant (subject to four-year vesting on an annual basis) is for a % of outstanding units instead of a hard number? Is the initial 83(b) the calculated hard number and then another 83(b) must be filed each time there is a follow-on investment that has the effect of increasing that original hard number?
By maje style November 11, 2016 - 1:10 am
waterproof cover for bag
maje style http://www.pst-dp.com/shoppingparadise/
By Keith November 19, 2016 - 10:57 am
I filed an 83-b for private company stock in December of 2015, and paid tax on the difference between a 42-cent price and the FMV of $1.06 at the time of exercise.
This year, November 1st, the private company was purchased by a public company for $12.50 per share, and the unvested shares from my exercise were converted into RSU’s of the new company (which has a stock price of $75).
They are suggesting filing a SECOND 83-b for these unvested shares. I would like to understand what I should use as the “amount paid” for these RSU’s. Their FMV of the RSU’s on the acquisition/merger date was $75.
I don’t want to end up paying taxes early on the difference between 12.50 and 1.06 if I can delay it until selling the shares. Should I report the “amount paid” as equal to the price at the time of the company acquisition? If so, the amount paid would be 75 and the FMV would be 75 and there would be no current tax consequences.
Later, when I vest and sell these shares, I will try to get LT gains treatment.
Does using the 75 price and the 75 FMV for an 83-b form make sense, or am I doing this wrong? Thank you
By Joe Wallin November 19, 2016 - 7:23 pm
Would suggest you hire someone to assist. I think this is beyond the back and forth of a web site.
By ps March 15, 2017 - 1:32 pm
Thanks for the post. Could you confirm if it is okay to miss spouse signature on 83(b) form.
I am still in 30 day period, should I refile it?
By Abhi March 19, 2017 - 3:56 pm
I completed my 1 year in one of the startup therefore I was eligible for 25% of stock options and I went ahead and exercised stock options. I also send 83B election to IRS within 30 days and got their response as well.
Do I need to attach 83B election copy while filing taxes of 2016?
Can that be done through e-filing?
Thanks.
By Joe Wallin March 30, 2017 - 9:39 pm
You have to attach a copy of the election to your form 1040 for the year. I presume this can be done electronically but I am not certain.
By Abhi March 31, 2017 - 11:29 am
Based on this link, I dont need to attach 83B election.
https://ttlc.intuit.com/questions/3846086-related-to-83b-election-in-2016
By D Allen April 21, 2017 - 10:15 pm
Hi Joe! I incorporated a company 7 months ago with a couple of co-founders and it has no value. We never filed for 83 (b) but we also never submitted any vesting schedule for our shares. We are wondering if we can still file for election 83 (b) and date how we our authorizing the shares of our company to within the last 30 days. Is that appropriate since we are granting the release of the shares from our company at this date, or is the grant date the day we incorporated? Thank you! We incorporated in Delaware and applied for foreign qualification to do business in California.
By D Allen April 21, 2017 - 10:16 pm
We’ve agreed to have a 4 year vesting with 25% up front and authorized 10,000,000 shares at $0.00001 par value when we first incorporated
By Brad L May 21, 2017 - 4:35 pm
I have the same problem, wife told me about this recently a month after i formed my startup. I will like to know if there is someone who can help fix this.
By D Allen April 21, 2017 - 10:33 pm
We also just recently reported taxes for 2016, where we operated at a loss, and reported that we each had 27% voting options for schedule k so don’t know if that would make a difference.
By Christopher August 22, 2017 - 3:11 pm
Thanks for fielding these questions. I have an existing single member LLC that was formed last year and never filed an operating agreement or an 83(b). I have no revenue at this point but I’ll launch the software-based service in a few months. In the mean time I’ve decided to award my developer 10% founding interest in the company for his past and continued work. I figured I can simply form a new LLC and file 83(b). Easy and clean fix, however, a CPA today told me that the founding members (me and my developer) cannot file an 83(b) because we are 100% vested at the time the llc was formed. Assuming this is true at face value, I suppose my question is; is there a creative way to make myself, as a founding member of my LLC, eligible for an 83(b) election perhaps by making my own interest subject to repurchase or subject to a venture buyout or something? Thanks.
By Rickland Powell September 22, 2017 - 12:13 pm
This website was extremely informative. Thank you so much for keeping it up!
I started a company a year ago. There are 4 founders, and we each received shares outright, at the inception date of the company. I presume we don’t need to file an 83(b) for those.
In January, we hired 2 additional employees. Their offer letter promised a number of shares to be given to them, beginning this upcoming January and every quarter thereafter for two years. When presented to them, these shares are fully vested. The remaining shares sit in our pool earmarked, but not issued, until the date arrives.
The same is true for the subsequent employees we hired – A number of shares issued on their 1 year anniversary and quarterly for two years hence.
As January is approaching, when will (do?) I need to file an 83(b)?
It sounds like the way I have it set up, shares aren’t actually issued until the vest, and therefore I don’t need to file one. Is this correct?
*Extra data point: The company was originally funded by the four founders in October of 2016. When we released our Alpha, we were able to raise ~4x the initial funds at a significantly higher valuation. We are likely to seek expansion funding at some point in 2018, depending on the success of the game we just released, which will increase the valuation yet again. All of our employees will be receiving illiquid shares at the valuation on the day of issuance.
By Joe Wallin September 26, 2017 - 1:24 pm
If you want to call me I am happy to talk to you about this. 206 669 0997
By Anna P October 23, 2017 - 4:59 pm
Great website! I am founding a company and just received my stock (4-year vesting) in the name of an LLC that I am 50% owner of. Can each member of the LLC file an 83(b) election, can the LLC file an 83(b) or are we not eligible for the 83(b) election at all since the stock is owned by the LLC? If each of the two members files (50% owners), should they each file 50% of the value of the stock grant? I’m having a hard time finding any information about this (including from my CPA and my lawyer). Thanks so much!
By Amanda May 15, 2018 - 8:10 am
Do I need to fill out the 83(b) if they are units? First time I have ever been offered RSU from an employer. I am seeing articles saying no but my employer said do fill it out and mail it to the IRS. They don’t have an official HR Manager and the Office Manager doesn’t seem to have experience or knowledge on this. When I told her I was researching RSU’s she told me to get back to her on what I find. She said she would be very interested in what I find out.