Section 83(b) election simplified

The IRS issued proposed regulations that can be relied on for tax returns for 2015 eliminating the requirement to attach a copy of a Section 83(b) election to the taxpayer’s income tax return for the year of the election.

The Section 83(b) election allows a taxpayer to disregard restrictions such as vesting for determining when a transfer of property is taxable.  It is an important election when property is expected to rapidly increase in value, such as an early exercise of an unvested nonqualified stock option for start up company stock.  Income is computed based on the excess of the fair market value on the date of transfer (option exercise) over the amount paid for the property.  Without the election, the income would be computed on the later of the date of transfer or the date the property becomes vested.

“This will make life easier for many employees who have timely mailed their Section 83(b) elections to the IRS and want to electronically file their income tax returns,” says Michael Gray, CPA, author of “Employee Stock Options - Executive Tax Planning.”

Contact Information

Michael Gray

CPA

Michael Gray, CPA

(1) (408) 918-3161

mgray@taxtrimmers.com