An 83(b) Election is a filing with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code that lets the recipient of restricted stock, or other property subject to vesting, pay income tax on its value when it is granted rather than as it vests.
Without the election, the holder of unvested stock recognizes ordinary income each time a portion vests, measured by the stock's fair market value on that date. With the election, the holder recognizes income once, at the time of transfer, on the difference between the stock's fair market value and any amount paid for it. For founders and early employees who receive stock while the company's value is low, that amount is often small or zero, and the holding period for capital gains begins at grant. The election must be filed within 30 days of the transfer, cannot be revoked without IRS consent, and allows no deduction if the stock is later forfeited.
Filing an 83(b) Election is one of the 📝Specialized Digital Micro Tasks: work that draws on a combination of education, training, and problem-solving experience. The election commonly accompanies the restricted stock grants and early exercises described in 📝Granting Equity.