The Advisors' Blog

– Liz Dunshee

Save this blog from Hunton Andrews Kurth for the next time a client asks about 83(b) elections. It explains the alternatives – and even gives an example. Here’s an excerpt (and here’s another memo from DLA Piper):

The question of an 83(b) election applies any time an employer grants certain restricted stock to an employee (i.e., restricted due to a time-based and/or performance-based vesting schedule). The primary objective of an 83(b) election is for the employee to maximize his or her capital gains treatment with respect to any appreciation in the restricted stock award from the date of grant.

From an economic perspective, the employee is generally better off making an 83(b) election IF: (i) the vesting shedule becomes satisfied (e.g., no forfeiture of the award due to the employee terminating employment) AND (ii) the fair market value of the award appreciates from the date of grant.