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ATP: 83(b) restricted stock : taxes

WhatUTalkinBout Willis

WhatUTalkinBout Willis

Steve Lepore
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All knowing PIT:

Let's say I'm about to receive a grant of company stock.

Can some of you help me understand the tax implications?

Assumptions: The stock isn't worth a great deal right now, brand new company.

Company is set to grow pretty rapidly.

Vesting period is 24 months.

Questions:

Do I pay within 30 days on the value, or when vested?
At what rate do I pay the taxes?
How about if I decide to sell after vesting period is over, or decide to leave the company (which would force a sale of all shares)? How do the taxes work then? Like normal capital gains?
 
If you don't make an 83(b) election, you have compensation expense on the FMV of the restricted stock when it vests, which becomes your basis in the stock. Any additional gain over that basis when you sell is cap gains..

If you do make an 83(b) election, you have compensation expense on the FMV of the stock as of the grant date. That is the basis of your stock. You have no income when it vests and capital gains on the difference between the sales price and the basis when sold.

The compensation expense should be included in with your W-2 and withholding is required. Your employer should withhold as soon as your notify then you made the election.

If the stock has a very low FMV and a high growth potential, then it is probably a good risk to make the election.

You have 30 days from grant to make the election. Keep proof of delivery!!!
 
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You have the option to elect to include it in your gross income for the taxable year 30 days after the transfer of your stock. the downside is that if it doesn't vest then you don't get to take a deduction if you forfeit your stock.
 
I will invoke the Circular 230 disclosure for all responses to this thread.
 
Obligatory: this is not legal advice

I would make the election to include it in your gross income while it is priced low and will have less of an impact on the tax bracket since it is poised to increase. That way you'll pay capital gains rates instead of income tax rates.
 
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
 
DeaconCav06 said:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
Click to expand...

Yeppers good call Sleepy
 
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