Taxplaining – Section 83(b) Elections

To 83(b), or not to 83(b), that is the question

 

Section 83(b) is an election that allows a taxpayer to “elect” to treat unvested or restricted property as fully vested for tax purposes and pay the tax at grant rather than at time of vesting (and starts the holding period for long-term capital gains). By accelerating the timing of the taxation, the taxpayer is “betting” that they will (a) meet the conditions of vesting and (b) the property will increase significantly in value. If these two events happen, the taxpayer will be able to capture tax significant tax savings because of the lower tax rates on long-term capital gains.

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Alexander Lee Partner, Los Angeles
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