Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Section 83(b) Elections Question
Old 03-19-2011, 11:48 AM   #1
Recycles dryer sheets
Join Date: Nov 2010
Location: Earth
Posts: 334
Section 83(b) Elections Question

I received restricted stock the other day; this is a first for me so I have a couple of questions:
1. I received 12,000 shares
2. They vest over 4 years
3. The stock price on the day averaged to 0.83
I believe the stock could go to $2.00 in two years (just my option).
If I want to file a section 83(b) to avoid future taxes at vesting and just have to pay the Capital Gains at the time of sale, less cost basis, do I have to pay for the restricted stock ($9,960) at this time?
I have read the online articles, but they all seem to trend towards founders.
Also, if I leave the company (retire) in 2 years does it make sense to do the section 83(b) filing.
I believe the stock could go up in the next couple of years and I would have 6,000 vested shares.

DFA is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-19-2011, 12:51 PM   #2
Thinks s/he gets paid by the post
Join Date: Jan 2004
Posts: 2,049
This is a stock grant, right? It's compensation? If so, you wouldn't pay anything but you would report it ($9960) to the IRS as taxable income. If you're serious about leaving in 2 years, then you might want to only file for the 6000 shares and not all of it. (Of course, the extra $4980 in taxable income is a small price to pay if you decide to continue past 2 years.)

I'm not a CPA or lawyer. It's probably worth it to get an hours time and ask him/her.

eridanus is offline   Reply With Quote
Old 03-19-2011, 01:25 PM   #3
Recycles dryer sheets
Join Date: Nov 2010
Location: Earth
Posts: 334
Thanks, Yes it is stock grants, Yes it is compensaton. So I would pay the income tax on my 2011 taxes a income?
DFA is offline   Reply With Quote
Old 03-19-2011, 10:28 PM   #4
Thinks s/he gets paid by the post
Join Date: May 2006
Location: Orlando
Posts: 2,077
This book by Kaye Thomas ( might help. Pretty highly rated on Amazon.
Attached Images
File Type: jpg Consider Your Options.jpg (6.4 KB, 27 views)
Buckeye is offline   Reply With Quote
Old 03-20-2011, 09:13 AM   #5
Thinks s/he gets paid by the post
Join Date: Aug 2004
Location: Houston
Posts: 1,447
99% of the time I cannot imagine why someone would make an 83b election. There are a lot of situations where the tax you paid will get totally wasted and you don't get any kind of credit or offset. 1. The stock could go to zero before vesting. 2. You forfeit the shares for some reason (quit/fired/etc).

Plus you are accelerating your cash taxes now while you are working and probably are in a higher tax bracket, if the shares vest and you retire then your marginal tax rate will drop. Why pay tax at a higher rate today if you don't have to?
soupcxan is offline   Reply With Quote
Old 03-20-2011, 09:42 AM   #6
MichaelB's Avatar
Join Date: Jan 2008
Location: lumpen slums of cyberspace
Posts: 30,730
Originally Posted by Buckeye View Post
This book by Kaye Thomas ( might help. Pretty highly rated on Amazon.
Fairmark is an excellent source of tax info. Read their web site on Section 83b here Section 83b Election From Fairmark
When the election makes sense

The section 83b election makes sense in the following situations:
  • The amount of income you'll report when you make the election is small and the potential growth in value of the stock is great.
  • You expect reasonable growth in the value of the stock and the likelihood of a forfeiture is very small.
Conversely, you should avoid the section 83b election where a forfeiture seems likely, or where you'll pay a great deal of tax at the time of the election with only modest prospects for growth in the value of the stock.
What is the risk you forfeit the stock before vesting? That is a risk that needs to be quantified. Also, is the tax you'll pay now on the add'l $9.96K in income a burden? Can you pay it without causing hardship or disrupting your finances?

MichaelB is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Announcement: New Links Section Andy R Forum Admin 11 09-07-2008 04:54 PM
WSJ Retirement Section 12/11/06 ZMAN Hi, I am... 98 12-24-2006 12:09 PM

» Quick Links

All times are GMT -6. The time now is 11:55 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.